PUBLIC SECTOR ACCOUNTING

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 Some ice breaking
will do for starters!!!

2
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• Name: Prof. Samuel N. Y. Simpson

• Office Location: Main Block, G5 and Old

Graduate Block
• Office Hours: TBA
• E-mail Address: snysimpson@ug.edu.gh/

• Teaching Assistant: Foster Osei

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• This course equips students with the concepts, principles and
developments associated with financial management in the Public sector-
central, local and NGOs.
• The course starts with an overview the nature, context and regulatory
environment of the public sector.
• It continues to deal with budgeting, accountability and value for money,
Public- Private Partnership agreements, revenue and expenditure
management, and procurement procedure.
• Other areas include, the application of International Public Sector
Accounting Standards [IPSAS] and chart of accounts in the financial
reporting of the public sector- central, local and NGOs.
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Upon successful completion of this course students should be able to:
• Explain the main features of public sector entities and accounting systems
• Discuss the public sector reporting framework.
• Prepare complete set of general-purpose financial statements in the
public sector.
• Apply the requirements of International Public Sector Accounting
Standards [IPSAS] to National and Sub-National Governments
(Central and Local)
• Describe performance management in the public sector
• Evaluate developments in Public procurements, PPP and Public sector
auditing
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• The Context of Public Financial Management & Accounting
• Legal & Regulatory Framework for Public Financial Management
• Budgets and Budgeting in the Public Sector
• Public Procurement: The Public Procurement Act
• Revenue Management and Expenditure Control
• Accounting Concepts, Bases and International Public Sector
Accounting Standards (IPSAS)
• Financial Reporting for National and Sub-National Governments
(Central and Local)
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• Accountability, Performance Management and Value for Money in the
Public Sector
• Accounting for Public Private Partnerships
• Public Sector Auditing

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• The course will be delivered through face-to-face and online media
such as zoom and Sakai LMS.
• All relevant resources will be shared through class representative
or/and uploaded on the Sakai LMS for students to access.
• Students will be assessed as follows:
• Continuous Assessments:
• Assignments 30%
• Attendance and Class Participation 10%
• Final Exam 60%

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• There is no single textbook for this course.
• The course is multi-disciplinary, thus, draws from accounting, public
finance, and other related areas.
• Bandy, G. (2018). International Public Financial Management: Essentials of
Public Sector Accounting. Routledge.
• Bandy, G. (2014). Financial management and accounting in the public sector.
Routledge.
• 2018-2020 Handbook of IPSAS Pronouncements
• ICAG Public Sector Accounting and Finance Student Manual.

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• Other Readings
• Simpson, N.Y.S. (2012). Developments in public sector accounting practices: The
Ghanaian experience. In Accounting in Africa (pp. 209-226). Emerald Group
Publishing Limited.
• Simpson, S. N. Y., Tetteh, L. A., & Agyenim-Boateng, C. (2020). Exploring the socio-
cultural factors in the implementation of public financial management
information system in Ghana. Journal of Accounting & Organizational Change.
Vol. 16 No. 3, pp. 349-368
• 1992 Constitution of Ghana
• Public Financial Management Act, 2016, Act 921 (Repealed: Financial
Administration Act 2003, Act 654
• Public Financial Management Regulation 2019, L.I. 2378
• National Pension Act 2008, Act 766
• Petroleum Revenue Management Act 2011, Act 815.
• Public Procurement Act 2003 Act 663 and Public Procurement (Amendment) Act,
2016 Act, 914
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• International Public Sector Accounting Standards (IPSAS)
• Local Government Act 2016, Act 936
• Audit Service Act 2000 Act 584
• Internal Audit Agency Act 2003, Act 658
• Other fund specific laws such as:
• District Assembly Common Fund Act 1993 (Act 455)
• Ghana Education Trust Fund Act 2000 (Act 581)
• Road Fund Act 1997 (Act 536)
• Government of Ghana Budgets
• Prescribed journal articles on relevant topics
• Relevant journal articles
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• Class attendance is expected.
• Students are encouraged to participate actively in class in regard to analysis
and discussion of reading material, lecture material, problems, and cases.
• Class time will be devoted to lecture, discussion, and analysis of assigned
problems.
• Students should expect to spend substantial amounts of time, in and out of
class, to keep up with readings and listening to current affairs.
• If you are unable to make it to class you my send information through the
class representative or contact me PRIOR to class.
• You are responsible for what takes place or is announced in class

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• Plagiarism policy
• Plagiarism in any form is unacceptable and shall be treated as a serious
offence.
• ALL students are expected to familiarize themselves with the contents of the
Policy
• Students are expected to familiarize themselves with grading scale and
all academic policies that apply to them.

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• Upon completion of today’s session, students should be able to:
• Discuss the association between political economy, economic systems
and public sector
• Explain the context and relevance of the public sector
• Define public sector accounting and discussion the information needs
of users
• Explain the concept financial management
• Identify and explain the elements of public financial management
• Identify the basic tools for public financial management
• Discuss the approaches of public financial management
• Discuss the regulatory environment of the public sector

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• The political aspect involves the use of state power to make decisions
about who gets what, when, how, and why in the distribution of
public goods and social values.
• The economy or economics, deals with how scarce resources are
allocated to different uses and goods are distributed among individual
actors.
• Political economy brings together both political and economic
considerations in allocating resources.
• It is concerned with the use of political power to deal with economic
resources, and How economic resources affect political decisions.

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• An economic system is an organized way in which a country allocates
resources and distributes goods and services across the whole nation
or a given geographic area.
• It is includes the combination of several institutions, entities,
agencies, decision-making processes and patterns of consumption
that make up the economic structure of a specific community.
• It sets the rules of play for all the players in an economy, and defines
how they can interact with one another

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• What is the role of public sector in an economic system?

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• The public sector encompasses both public sector entities
and other organisations whose primary objective is to:
• provide goods or services for the general public or social benefit rather than
providing a financial return to equity shareholders.
• It is represented by entities established and arrangements
made to support the USE and DISTRIBUTION the all
resources for the general administration and the welfare of
the citizens.
• It often associated with
• public administration, public service, and governmental entities
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• The phrase “public sector” is often synonymous with public
administration, public service, and governmental entities.
• Public sector is said to be that part of the economy where
funding comes largely from government
• Public Services are goods or services provided on a not-for profit
basis to the general public or for social benefit.
• Public service organisation is one or more bodies managed as a
coherent entity with the primary objective of providing public
services.

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• They encompass both public sector bodies and other
organisations whose primary objective is to provide goods or
services for the general public or social benefit rather than
providing a financial return to equity shareholders.
• The sector has to do with:
• the whole nation,
• represented by organisations that are established to use the
resources that belong to the whole nation for the general
administration of a country and for the welfare of the citizens.
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• The sector is said to encompass the following:
• Government activity and its consequences or State general
decision-making and its outcomes (authority interpretation)
• Governmental consumption, investment and transfers (allocation
and distribution interpretation)
• Government production (provision interpretation)
• Government owned and employment (ownership and
employment)

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• The size of the public sector have been variously measured:
• the ratio of government expenditures or revenues to GDP, with both
figures expressed in current national currencies
• Public sector employees as a percentage of the total workforce
employment

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• Growing involvement of private sector entities
• Growing involvement of civil society organisations
• Outsourcing of government functions to the private sector
• Joint ventures, and
• Financing innovations such as PPP, PFI, etc.

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• The OECD defines as:
• General government and
• Public corporations including central banks.

• The United Nations provides a similar definition, and includes not-for-

profit institutions owned by the state

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• IFAC defines “public sector” as:
• national governments,
• regional (e.g., state, provincial, territorial) governments,
• local (e.g., city, town) governments and
• related governmental entities (e.g., agencies, boards, commissions
and enterprises)
• The IMF defines public sector as:

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• General government:
• consists of all governmental units of the executive, judiciary, and
legislature at the central, state/provincial/regional and local levels

• Public corporations:
• Include the financial and non-financial corporations concerned
with commercial activities
• Governmental Business Enterprises

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• Is an entity with the power to contract in its own name;
• Has been assigned the financial and operational authority to
• carry on a business;
• Sells goods and services, in the normal course of its business, to other
entities at a profit or full cost recovery;
• Is not reliant on continuing government funding to be a going concern
(other than purchases of outputs at arm‟s length); and
• Is controlled by a public sector entity

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• Generally, what constitutes public sector is determined by:
• The purpose (or function) of the entity involved,
• Ownership (and/or control),
• Source and flow of resource,
• Level of centralisation and bureaucratization,

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• The presence of multiple principals

• The presence of multiple tasks or goals

• The nature of output and

• The ability to accurately measure that output

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• Sources of definition and scope:
• Chapters 8, 10, 11, 14 of the 1992 Constitution
• The Public Services Commission Act, 1994 (482)

• Includes
• MDAs
• MMDAs
• Boards, commissions and authorities
• Public educational and research institution
• Public corporations/ SOEs / GBEs

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• Covered Entities --“” means
• the Executive, Legislature and Judiciary;
• Constitutional bodies;
• Ministries, Departments Agencies and local government authorities;
• the public service;
• autonomous agencies; and
• statutory bodies

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• Areas of Differences:
• Goals & Objectives, Types of orgs., Ownership
• Legal Basis, Funding, Accounting system, Nature of Financial
Statement
• Expenditure , Nature of Output, Product pricing
• Nature of Accountability

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• Operate in the same economy and compete for same resources:
financial, capital, and human
• Acquire and convert scarce resources into goods and services •
Use of accounting and other information systems
• Need to operate economically, effectively, and efficiently
• Provide goods and services, many of which may be similar

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• Size of the public sector and its relation to the overall size of the
economy
• Configuration:
• the dichotomy of service policy and purchasing, and service provision
• the mix of public sector and private sector service provision
• organizational simplification.
• Changes in functions
• Organization and culture
• Financing trends
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• A large private bus company in Empire City went bankrupt. At Empire
City's request, the state legislature established a legally separate
public benefit corporation named Metro City Bus. In the law
establishing Metro City Bus, Empire City was authorized to appoint
Metro's entire governing body, and Metro was authorized to issue
tax-exempt debt to assume the assets of the private bus company.
When Metro City Bus went to prepare its financial statements, a
question was raised. Was Metro City Bus a public sector entity?
• Using specific factors in this case, discuss whether Metro City Bus is or
is not a public sector entity.
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• Is the system developed for and/or in public sector organisations to
enable them account for, or trace the finances they generate or use and
the services or developments that they undertake.
• Is the system of accountability through which the established
institutions of the public report on the available revenues of the nation
and how these revenues are used.

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• It refers to all the financial documents and records of public
institutions relating to the collection of government revenue and
their analysis, the control of expenditure, the administration of
trust funds, the management of government stores and all the
financial responsibilities and duties of the relevant government
departments.

• Is the process of recording, analysing, classifying, summarising,

communicating and interpreting financial information about
government in AGGREGATE and IN DETAILS, reflecting all
transactions involving the receipt, transfer and disposition of
government funds and assets in general

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• To fulfil legal requirement:
• The law requires that government accounts are prepared annually
• To satisfy the stewardship function:
• The ruling government is the steward of the resources and finances of
the nation and so has to give account of how these finances are used
• To enable the government to plan well the future developments and
programmes of the nation;
• To provide a process to control the use of the financial and other resources
of the nation;
• To provide the mechanism for the monitoring of the public purse

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• Who are the users?

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• Some principal users are:
• Legislative and other governing bodies
• public as tax payers and/or voters
• Investors and creditors
• Rating Agencies
• Donors and sponsors
• Management
• Regulating bodies

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• Others are
• The media,
• economic and financial analysts,
• customers and clients,
• suppliers,
• employees,
• competitors,
• academia
• pressure groups,

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• Who are the stakeholders?
• Who are the powerful stakeholders?

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• Mendelow (1991) is the most used.
• It suggests we analyse our stakeholder groups based on:
• Power/influence (the ability to influence an entity’s strategy or project
resources) and
• Interest (how interested they are in an entity or project succeeding).

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• Identify any public policy or programme, and the relevant stakeholders
and develop the stakeholder matrix.

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• Financial management is one of the factors that ensures successful
public sector management.
• It generates vital information for better decision making, better
services, and better value for money if resources are managed and
controlled transparently and effectively.
• Public Financial Management (PFM) is multidimensional – and liable
to differ between countries.

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• It impacts on a broad range of areas including:
• aggregate financial management – fiscal sustainability, resource mobilisation
and allocation
• operational management – performance, value-for-money and budget
management
• governance – transparency and accountability
• fiduciary risk management – controls, compliance and oversight

• PFM is no longer viewed as a purely technical finance and accounting

topic (as it once was); rather, it has become a subject where
institutions and political factors play an important role.

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• Definition may PFM differ from donor to donor and from one partner
country to another.
• It encompasses the mobilisation of revenue; the allocation of these
funds to various activities; expenditure; and accounting for spent
funds.
• It includes all components of a country’s budget process –
• upstream (including strategic planning, medium term expenditure
framework, annual budgeting), and
• downstream (including revenue management, procurement, control,
accounting, reporting, monitoring and evaluation, audit and oversight).

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• Public Financial Management (PFM) is the system by which the
financial aspects of the public services’ business are directed,
controlled and influenced, to support the delivery of the sector goals
(CIPFA-1)
• PFM is the system by which financial resources are planned, directed
and controlled to enable and influence the efficient and effective
delivery of public service goals (CIPFA-2).
• Is any activity in order to analyse, structure, set objectives and
implement measures in the field of finance, if the entity is
government of any level
• a corporation controlled by the government or
• an international organisation set up by various nations
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• For countries, financial management refers to the budgeting,
accounting, internal control, funds flow, financial reporting, and
auditing arrangements by which they receive funds, allocate them
and record their use (World Bank).
• PFM is concerned with the laws, organizations, systems and
procedures available to governments wanting to secure and use
resources effectively, efficiently and transparently.
• It encompasses taxes and other government revenue, borrowing and
debt management, but its main focus is expenditure management,
especially in the context of public budgeting.

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• Other definitions tend to cluster around the budget as the central
theme.
• PFM has sub-systems such as:
• Public sector accounting
• Government financial statistics (GFS)
• Budgeting
• Treasury
• PFM is said to comprise:
• the institutional framework, systems, and procedures that govern the
preparation, execution, and reporting of the budget
• all phases of the budget cycle, including the preparation of the budget,
internal control and audit, procurement, monitoring and reporting
arrangements, and external audit
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• It promotes accountability within developing countries and
provides donors with assurance on the use of their funds.
• The objectives of PFM include:
• maintaining fiscal discipline;
• allocating resources strategically; and
• operational efficiency.

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 Budget Realism:
Accountability and
Is the budget
Transparency :
realistic, and
implemented as Are effective external
intended in a financial accountability
predictable manner? and transparency
arrangements in place?

Six core
Comprehensive, objectives
Policy-based, budget: of PFM
Does the budget
capture all relevant system Control :
fiscal transactions, and Is effective control and
is the process, giving stewardship exercised
regard to government in the use of public
policy? funds?

Comprehensive fiscal risk

oversight :
Information:
Is oversight of fiscal risk
arising from public enterprises Is adequate fiscal, revenue and expenditure
and sub-national information produced and disseminated to
governments adequate? meet decision-making and management
purposes?
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• The elements PFM have been variously categorised.
• For example:
• budget,
• procurement,
• accountability and transparency,
• audit and control,
• revenue and resources mobilisation,
• debt management

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• Public Financial Management Performance Assessment Framework
(PEFA).
• Code of Good Practice on Fiscal Transparency
• Public expenditure reviews
• Public expenditure tracking surveys
• Country Financial Accountability Assessment
• Country procurement assessment reports

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• Task-based
• Institutional
• Integrated

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• Elements of this approach include:
• Public finance: the economic basis of government activity,
government expenditure, government financing including taxation
and debt financing
• The above require addressing the following questions:
• What is the economic rationale behind governments? why should they
exist?
What should/shouldn’t they do?
• How should budgets/funds be allocated between various types of
expenditures? How should expenditure be controlled?
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• Public sector financial planning: budgeting (beyond one year)
• Public sector accounting and reporting: budget execution (receipts
and spending)
• Public sector controlling: budget monitoring (comparing, financial
plans, objectives and actual receipts and spending)
• Public sector assurance: internal and external audit
• Internal control: checks, controlling goals and objectives, including
identifying with risk:
• E.g. Committee of Sponsoring Organisations (COSO)-framework, public
internal financial control (PIfC)
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• This approach is concerned with how reputations of institution affects
PFM.
• Macroeconomic control units: statistics sub-units, Policy oriented
Ministries
• Budget offices
• Account offices/Treasuries
• Auditing offices

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• This approach has become prevalent following the weaknesses in the
other approaches, i.e., the tendency of separation and not cooperation
• Examples:
• PEFA PFM performance measurement framework (6 main dimensions)
• Credibility of budget
• Comprehensiveness and transparency
• Policy-based budgeting
• Predictability and control in budget execution
• Accounting, recording and reporting
• External scrutiny and audit

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• The Regulatory environment includes the standards or guidelines, the
legal frameworks and the institutions associated with public sector
accounting and finance.
• Traditional regulatory frameworks
• Country based
• Sector based
• Function based
• Contemporary regulatory framework
• International Public Sector Accounting Standard (IPSAS)

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• 1992 Constitution of Ghana
• Public Financial Management Act, 2016, Act 921 (Repealed: Financial
Administration Act 2003, Act 654
• National Pension Act 2008, Act 766
• Petroleum Revenue Management Act 2011, Act 815.
• Public Procurement Act 2003 Act 663 and Public Procurement
(Amendment) Act, 2016 Act, 914

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• Local Government Act 2016, Act 936
• Audit Service Act 2000 Act 584
• Internal Audit Agency Act 2003, Act 658
• Other fund specific laws such as:
• District Assembly Common Fund Act 1993 (Act 455)
• Ghana Education Trust Fund Act 2000 (Act 581)
• Road Fund Act 1997 (Act 536)

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• Executive
• Judiciary
• Parliamentary Control
• Ministry of Finance (MOF)
• Controller and Accountant-General
• Auditor-General
• Internal Audit Agency
• Supervisory bodies (BoG, NPRA, SIGA, SEC, NIC)
• NDPC
• GSS SNYS:UGBS, 2023 70
• PFM is concerned with the laws, organizations, systems and procedures
available to governments wanting to secure and use resources effectively,
efficiently and transparently

• PFM is fundamentally concerned with … the management of

government finances – both expenditure and revenue.

• Narrow : budget process and cash management

• Broad : all aspects of generating and spending resources

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• Government activities are financed through tax revenues, non- tax
revenue and borrowings
 Tax revenue sources:
 Direct taxes: Personal income tax (PAYE), Company/corporate
tax, capital gain tax, gift tax
 Indirect taxes: Import duties, export duties, petroleum levy,
excise duties, VAT, mobile telecom tax.

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 Non tax revenue:
 Proceeds from the sale of state assets including divestiture
proceeds.
 Dividends from state owned enterprises.
 Petroleum/oil revenue
 fines and penalties
 Interest on loans and other investments
 Royalties from mineral and other natural resources
 Fees and user-charges
 Grants

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• Grant:
• A financial award given by the federal, state or local government to an
eligible grantee.
• Government grants are not expected to be repaid by the recipient.
• Grants do not include technical assistance or other forms of financial
assistance such as a loan or loan guarantee, an interest rate subsidy,
direct appropriation or revenue sharing.

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• Aid:
• Is a voluntary transfer of resources from one country to another.
• The type of aid given may be classified according to various factors,
such as
• its intended purpose,
• the terms or conditions (if any) under which it is given,
• its source,
• its intended use, and
• its level of urgency:

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• Grant-in-Aid
• A transfer of money from government(s) to a state government, local
government or individual person for the purposes of funding a specific project
or program

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 Borrowings
 Locally contracted borrowings and Loans.
 Externally/foreign contracted loans include; bilateral loans from other
countries and multilateral loans from International Monetary Funds, World
Bank etc..

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• Special Purpose Vehicle
• SPV provides a good framework for raising funds, linking participants legally
and assuring supply, production and marketing of products .
• SPV are used interchangeable with SPEs
• SPEs are intentionally created as separate legal entities, with various degrees
of operational autonomy, and various arrangements establishing their
relationships to the originators, partners and investors.
• Although SPEs are legal constructs, the accounting and finance community
agrees that it is more of economic substance, rather than legal form.
• This allows for improved financing and a greater degree of operational
control for the private agent
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• Examples of SPV in Ghana:

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• Public-Private Partnership (PPP):
• Is a long-term arrangement where private sector organization take on risk and
responsibility for the delivery of a public project, usually involves the creation
or enhancement of a fixed asset.
• Is an approach to delivering public services that involves the private sector, but
one that provides for a more direct control relationship between the public and
private sector than would be achieved by a simple (legally-protected) market-
based and arms-length purchase.

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• access to private finance for expanding services,
• clearer objectives,
• new ideas, flexibility, better planning,
• improved incentives for competitive tendering and greater value for money for public projects
• efficiency savings
• the desire to improve the performance of the public sector by employing innovative operation and
maintenance methods

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• reducing and stabilizing costs of providing services;
• improving environmental protection by ensuring compliance with
environmental requirements;
• reinforcing competition;
• reducing government budgetary constraints by accessing private
capital for infrastructure investments

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Service contract

Management contract

Design &Build

Service concession

Design-build-operate- Maintain (DBOM)

Design-build-finance-operate (DBFO)
Build-own-operate (BOO)
Build-own-operate-transfer (BOOT)

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• First in 2007, Ghana’s first bond secured $750million at an interest
rate of 8.5 per cent.
• The Second in 2013, fetched $1billion from the International Capital
Market, after securing $1.2billion. It attracted an interest rate of 7. 877
per cent.
• The third in 2014, attracted an order of $3billion, but secured
$1billion at an interest rate of 8.25 per cent

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• Upon completion of this session, students should be able to:
• Define budgeting in generally and as used in the public sector
• Outline the functions of budgeting
• Discuss the features of a good budget
• Discuss the behavioral issues associated with budgeting
• State and discuss the broad objectives of public sector budgeting
• State and discuss the approaches to public sector budgeting
• Explain and apply the concept of MTEF (MTBF) as used in public sector budgeting

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• Budgeting is simply balancing your expenses with your income.

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• The budget is a central policy document of government, showing how it will
prioritise and achieve its annual and multi-annual objectives.
• It is the primary instrument for implementing fiscal policy, and thereby
influencing the economy as a whole.
• Alongside other instruments of government policy – such as laws,
regulation and joint action with other actors in society – the budget aims to
turn plans and aspirations into reality.
• More than this, the budget is a contract between citizens and state,
showing how resources are raised and allocated for the delivery of public
services

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• Good budgeting is a broadly defined process that has:

• political,
• managerial,
• planning,
• communication, and
• financial dimensions

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• In businesses—management plans

• In governments—management plans AND laws

• Control the activities authorized to carry out plans

• Prepare statement that permit comparison of actual results with
budget and evaluation of variances

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• A typical budget contains the following minimum information:

• Types and amounts of authorized expenditures

• Purposes for which expenditures are to be made
• Planned means for financing expenditures

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• General objective of government budgeting is to
• ensure financial control,
• goal attainment, and
• managerial productivity.

SNYS:UGBS, 2022 SNYS:UGBS, 2023 Slide 94 94

• Map the following specific functions to the three broad goals
of budgeting (ensure financial control, goal attainment, and
managerial productivity)
• Assisting in policy making and planning
• Determining income and expenditure
• Coordinating government activities
• Providing bases for controlling revenue and expenditure
• Setting standards for evaluating performance
• Motivating organization managers (ministerial and departmental),
employees and others.

SNYS:UGBS, 2022 SNYS:UGBS, 2023 Slide 95 95

• The OECD has developed, and is developing, more detailed principles and
recommendations for further guidance on specific elements of the overall
budgeting framework.
• The overall intention is to provide a useful reference tool for
• policy-makers and practitioners around the world,
• help ensure that public resources are planned, managed and used
effectively
to make a positive impact on citizens’ lives

SNYS:UGBS, 2022 SNYS:UGBS, 2023 Slide 96 96

• The principles state among others that…
• Budgets should be managed within clear, credible and predictable limits for
fiscal policy- A sound fiscal policy is one which avoids the build-up of large,
unsustainable debts, and which uses favourable economic times to build up
resilience and buffers against more difficult times.
• Budgets should be closely aligned with the medium-term strategic
priorities of government- the budgeting process should (a) develop a
stronger medium-term dimension, beyond the traditional annual cycle; and
(b) organise and structure the budget allocations in a way that corresponds
readily with national objectives.

SNYS:UGBS, 2022 SNYS:UGBS, 2023 Slide 97 97

• Budget documents and data should be open, transparent and accessible-
all budget reports should be published fully, promptly and routinely, and in
a way that is accessible to citizens.
• Debate on budgetary choices should be inclusive, participative and
realistic- parliament and citizens should be able to engage with and
influence the discussion about budgetary policy options, according to their
democratic mandate, competencies and perspectives.
• Budgets should present a comprehensive, accurate and reliable account
of the public finances-the budget document should account
comprehensively and correctly for all expenditures and revenues of the
national government

SNYS:UGBS, 2022 SNYS:UGBS, 2023 Slide 98 98

• Budget execution should be actively planned, managed and
monitored- the budget allocations should be implemented fully and
faithfully by the agencies of government, with oversight by the
relevant authorities and sector ministries as appropriate.
• Performance, evaluation and value for money should be integral to
the budget process-expenditure programmes should be routinely and
regularly subject to objective evaluation and review, to inform
resource allocation and re-prioritisation both within sector ministries
and across government as a whole

SNYS:UGBS, 2022 SNYS:UGBS, 2023 Slide 99 99

• Planning. Budgets are embodiment of plans of an organisation and
helps organisation to stick to their plans in a systematic manner.
• Control. Budgets serve as a tool of control of government activities
and programmes. It provides the benchmark or standards by which
activities could be controlled.
• Coordination. Budgets help to achieve goal congruence by bringing
the plans and objectives of subunits of government together to
ensure that national goals and objectives are achieved.

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• Communication. Budgets serve as a formal communication between
government and the public concerning the intention of government.
• Performance measurement. Budgets provide key performance indicators
or standards by which performance of entities and administrators could be
assessed
• Motivation. A budget produced from a participatory process serve as a
drive to managers and employees to achieve the overall goal of the entity.
• Accountability and transparency. Budget serve as tool of accountability as
it establishes responsibility and authority for executing the plans of the
organisation.
• It aslo ensure transparency in the allocation of resources to the various
sectors and projects of government.
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• A budget affects virtually all staff in an organisation
• those who prepare the budget
• those who use the budget for decision making
• those whose performance is evaluated using the budget
• Individuals’ reactions to the budgeting process may impact on
effectiveness of the process
• Three main issues to consider
• Participative budgeting
• Budgetary slack
• Budget difficulty

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• Participative budgeting
• Where managers at all levels of the organisation develop their
own initial budget estimates for their own area of operations, such
as revenue, expenditure, etc.

• It encourages bottom-up budgeting- where people at the lower

managerial and operational levels play an active part in setting
their own budget targets

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• Participative budgeting may …
• Encourage coordination and communication between managers
and a greater understanding and appreciation of the wider
organisation

• Lead to more accurate budget estimates as those close to the

operations have the best knowledge of the likely sales or costs in
their area

• Lead to individuals identifying more closely with the budget

targets
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• Participative budgeting…
• Can be expensive and time-consuming
• Can lead to delay in the finalisation of the budget
• May aggravate differences and disagreements
• Provides opportunities for padding the budgets

• Padding the budget

• Where managers intentionally underestimate revenue or over-
estimate expenditure for their responsibility area
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• Reasons for managers to pad the budget
• Their performance will look better when they exceed their budget
• A way of coping with uncertainty
• To guard against their initial budget requests being cut by senior
management

• Budgetary slack
• Difference between the (padded) estimated revenue or
expenditure projection and a realistic estimate of revenue or
expenditure
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6
• Budget difficulty
• Individuals are more likely to accept the budget and work
towards achieving those targets when….
• Targets are developed with their participation
• Targets are considered achievable
• There is frequent feedback on performance
• Individuals are held responsible for activities that are within their
control
• Achievement of targets is accompanied by rewards that are
valued
• Budgets should be set at a level that provides challenge and stretch,
but are achievable.
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• Different approaches to budgeting exist, many of which are not
exclusive to the public sector.

• Common approaches include:

• Traditional Line item budgeting
• Zero Base Budgeting
• Performance Budgeting
• Planning Programming and Budgeting System (PPBS)

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• It is the first of all the budgeting approaches.
• Its persistent existence has been attributed to the following:
• it enables expenditures to be limited to the amounts and items voted in the
appropriations;
• provides flexibility in considering across-the-board cuts for macroeconomic
purposes
• avoids any conflicts about objectives and the methods of achieving them.
• It has two features:
• line item and
• incremental features.
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9
• Emphasis is on the nature of the income and expenditure e.g. taxes,
loans, salaries material etc.
• The budget is expressed in terms of the kinds and quantity of objects
to be purchased and the estimated revenue to finance the
expenditure.
• Budget division are listed by organization and types of expenditure
are listed by category.
• It is also referred to as input budget or object of expenditure
budget.
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• It is where only the Increase or decrease in budget figures are
considered.

• It is argued that because incrementalism process is annually

repeated, it causes the authorities to make regular review of activities
and policies.

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• ZBB concept rejects the notion of a budgetary base.
• Argues that every item to be budgeted for should be scrutinised,
nothing being taken for granted.
• It requires that every expenditure must be justified from a zero point
every year as if a new programme or expenditure has just been
established hence requiring a full rationalization of its need and
purported accomplishments.
• The concept discourages agency heads from taking program
perpetuation for granted and to encourage them to reallocate funds
as they think appropriate.

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• The technique basically forces each manager to analyse and justify his
operation which inevitably leads him to a cost-benefit analysis for
each component of activity within his own area of responsibility.

• This approach is time-consuming and expensive to implement

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• This was proposed by The Hoover Commission in 1949 to the United States
government.
• It aims at:
• fulfilling the managerial productivity function of government.
• Improving the efficiency and effectiveness of public expenditure
by linking the funding of public sector organizations to the results
they deliver, making systematic use of performance information
• It requires reforms in the whole budgetary concept, particularly,
the functions, activities and projects

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4
• It proposes a move from emphasizing inputs, usually measured as
money expenditures for specified objects, to outputs measured in
physical terms where feasible.
• Expresses in financial terms the major activities or functions of a unit
with programme descriptions based on the activities being performed
rather than on the expenditure required.
• Focuses attention upon the general character and relative importance
of the work to be done, or upon the service to be rendered, rather
than upon the things to be acquired such as personal services,
supplies, equipment and so on.

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5
• it gives attention to productivity, though bias towards the output
portion of the input/output ratio of the productivity index.
• So, also known as Output Budget since the main emphasis being on
output rather than input.

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6
• It supports the legislature in meeting accountability requirements
because this budgeting system includes a narrative description of
each project

• Inputs and outputs are measured, the results of each activity

and associated cost being formally monitored

• Emphasis is also placed on carrying out the activities of

the organisation, as well as on controlling costs.
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7
• The technique was used with little success even in the United States
itself where it originated.

• It is difficult to classify government programmes with accuracy and

precision and this led to implementation difficulties.
• The process of allocation of cost estimates over the activity or
programme elements is difficult due to lack of the requisite
personnel.
• Most public sector activities are not easily measurable in output
terms.
• The technique fails to stress on long-run objectives of government, just
as the traditional budget.
• Performance budgeting is retrospective, based on the past and on the
record ofSNYS:UGBS,
prior2022accomplishment, or evaluative,Slidemeasuring
SNYS:UGBS, 2023 118
what was 11
done. 8
• Defined as:
• a systematic method of linking long-range planning with yearly
budgeting and evaluation.
• It involves definition of public needs; preparation of programs with
objectives to respond to those needs; and program implementation by
the most efficient means possible.

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• It is a centralised budgeting system where goals and objectives are
clarified from the top to give clear guidance during the budget
preparation phase.

• It is prospective or forward looking, concerned with objectives ahead

and the purpose of work.

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A. Formulate overall objectives and goals of the entity.
B. The possible alternative programmes which may be used to fulfil the desired
objectives are compared based on the effectiveness of each in achieving the
organisational objectives.
C. The total cost of each programme is related to the total benefits that would be
derived from the programme to determine the efficiency of the programme.
D. The most effective and efficient programmes are selected, integrated into a
comprehensive programme, and implemented.
E. The results of this programme, once initiated, are reviewed and judged on the
basis of performance. The purposes of this review are for the control in
the implementation of the programme and procurement of information for
future decisions and forecasts
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• It exposes programmes that are overlapping or contradictory in terms
of achieving objectives,
• Provides information on the impact that existing and alternative
programmes will have on objectives, and the associated cost.
• It emphasizes long-range planning on a routine basis and to review
and update programmes and objectives frequently.
• It enables management to evaluate issues like the efficiency and
economy of programmes, alternative programmes or alternative ways
of implementing the same programme, and giving priority to various
programmes to determine their overall effectiveness.

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• Measurability problems of public sector organisational goals or objectives.
• It is not easy to determine objectives or formulate a set of goals in governmental
organisations.
• It requires a great deal of time and money, as well as analytical ability on the part of both
preparers and users.
• It requires many long-run estimates of costs and benefits which makes the objective
measurement of performance very difficult.
• Others:
• It is more of a cosmetic than substantive change in budgets (United Nations, 1978)
• It is thought of as just one more example of a technique that is conceptually sound,
and yet because of practical limitation, incapable of satisfactory implementation
(Jones and Pendlebury, 2013)

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SNYS:UGBS, 2023 12
150
4
• The budgeting process is a continuous activity which involves many stages
which in interrelated in a back and forth manner.
• There is no agreement in the literature as to the number of stages in a typical
annual budgeting
• A good budget process is far more than the preparation of a legal document
that appropriates funds.
• A good budget process:
• Incorporates a medium‐term perspective
• Establishes linkages to broad organizational goals
• Focuses budget decisions on results and outcomes
• Involves and promotes effective communication with stakeholders
• Provide incentives to government management and employees
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5
• It is not simply an exercise in balancing revenues and expenditures
one year at a time, but is
• strategic in nature,
• encompassing a multi‐ year financial and operating plan that
allocates resources on the basis of identified goals.
• In practice, the budgeting processes are made up of several
activities.
• Though the activities may vary from countries, there are some
similarities

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6
• Also, the processes involves several activities, but can be grouped into
a budget cycle.
• This cycle aims to ensure that public expenditure is well planned,
executed and accounted for.

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7
SNYS:UGBS, 2023 154 12
8
SNYS:UGBS, 2023 129
SNYS:UGBS, 2023 130
SNYS:UGBS, 2023 131
• Regardless of the activities in the cycle, it can be grouped into:
• Budget formulation
• Budget execution
• Accounting and reporting
• External oversight

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The budget cycle starts with the budgeting process, in which the
government, with legislative oversight, plans for the use of the coming
year’s resources in accordance with policy priorities.

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3
SNYS:UGBS, 2023 13
4
Once the budget has been approved and the new fiscal year begins,
spending agencies and the Ministry of Finance embark on its
implementation.
They use the resources allocated to them on salaries for public
servants, running costs for their offices, such as rent and electricity, and
goods and services delivered to their beneficiaries (school books,
medicines).
The Ministry of Finance manages the flow of funds and monitors and
makes in-year adjustments to ensure compliance with the budget and
PFM rules.

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5
SNYS:UGBS, 2022 SNYS:UGBS, 2023 Slide 136 13
6
Throughout the fiscal year, each spending agency records its
expenditures (accounting).
These accounts are consolidated centrally by the Ministry of Finance.
At the end of the fiscal year, the Ministry of Finance issues a report that
demonstrates how the budget was implemented.

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SNYS:UGBS, 2022 SNYS:UGBS, 2023 Slide 138 13
8
This report is then subjected to external scrutiny.
The Supreme Auditing Institution, an independent government body,
reviews the government’s revenue collection and spending and issues
its own statement on the execution of the budget and the strength of
the PFM systems.
In many countries, this audit report is presented to the legislature for
further scrutiny and follow-up.

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 Budget
Policy Review
Execution

Strategic
External Audit
Planning

Budget Accounting &

Preparation Reporting

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 Budget control can be introduced through the budget
processes, introduced through budget control Act, and both.

 While the budget control Act generally focuses on deficit

reduction and reduction of discretionary expenses, other
control elements are evidenced in the budget cycle.

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1
 Budget formulation and approval:

 The budget cycle starts with the budgeting process, in

which the government, with legislative oversight, plans
for the use of the coming year’s resources in accordance
with policy priorities.

SNYS:UGBS, 2023 142 14

2
 Budget execution

 Once the budget has been approved and the new fiscal year
begins, spending agencies and the responsible Ministry embark
on its implementation.
 The responsible Ministry manages the flow of funds and
monitors and makes in-year adjustments to ensure compliance
with the budget and PFM rules.

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3
 Accounting and reporting
 Throughout the fiscal year, each spending agency records
its expenditures (accounting).
 These accounts are consolidated centrally
 At the end of the fiscal year, a report that demonstrates
how the budget was implemented is issues.

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4
 External oversight
 This report is then subjected to external scrutiny.
 An independent government body, reviews the government’s revenue
collection and spending and issues its own statement on the execution of
the budget and the strength of the PFM systems.
 In many countries, this audit report is presented to the legislature for
further scrutiny and follow-up.

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5
SNYS:UGBS, 2023 146
SNYS:UGBS, 2023 147
• Upon completion of this session, students should be able to:
• Trace the history and reforms in public sector budgeting in Ghana
• Discuss the application of MTEF to budgeting in Ghana
• Discuss the budgeting processes and cycle
• Discuss the changes in Ghana’s budgeting processes
• Discuss the introduction of GIFMIS and implications for public
sector budgeting

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8
 Budgeting in the Ghanaian Public Sector predates Ghana’s
independence from the British in 1957.
 The fundamental basis for budgeting are enshrined in the various
constitutional dispensations since independence:
 1957/1960 constitution: Part VIII and Article 58
 1969 constitution: Chapter eleven (129-132)
 1979 constitution: chapter thirteen (139-143)
 1992 constitution: chapter thirteen (175-180)
 Other legislations (FAR, 2004; PFMA, 2016)

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• Since the early 1980s, budgeting in the Ghanaian
public sector has gone through three (3) main
changes:
1. Pre-Public Investment Project (PIP) budget Era:

 where the budget was concerned with only two

line items:
• Recurrent expenditure, and
• Capital expenditure/development budget

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0
2. PIP budget/ Incremental Budget
 Concerned with nine (9) line items:1-6:recurrent and 7-9:
capital
 Capital budget has a two year projection
 Broad –based
 Shows sources of funding, etc.

3. MTEF budgeting: the Era of reforms

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1
Weaknesses in the Old Budgeting System
 Incremental budgeting without review, whether the activities
that were funded should have been continued or not.

 The investment budget was made up of a large number of

projects, making it more difficult to link the activities funded
through the development budget to the Government’s own
priorities.

 The budget preparation process did not link the achievement

of objectives and meeting of targets with the financial
resources required.

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2
 There was a general emphasis on the control of
inputs and less on improving performance of the
sector through meeting its objectives and targets
 The budget was not broad-based since it looked
only at domestic resource envelope.
 It lacked ownership on the part of MDAs;
 There was lack of timely reporting.

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3
 The weaknesses in Ghana’s budgeting systems were formally
identified initially in 1993 during the Public Expenditure Review (PER)
prepared by the Government of Ghana (another PER in 1994).
 As part of the reform, the Medium Term Expenditure Framework
(MTEF) was introduced, inspired by the Public Financial Management
Reform Programme (PUFMARP) and the Budget and Public
Expenditure Management System (BPEMS) launched by the Ministry
of Finance in July 1995.
 MTEF was initiated in 1996, it was implemented from fiscal year
1999.

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4
• The introduction of the project was supported by the Department
for International Development (DFID) of the British Government who
financially supported consultants to develop the MTEF concept.
• It begun on pilot basis in 3 MDAs in September, 1997, namely
Ministries of Education, Health, and Road and Transport
• MTEF is one component of the Public Financial Management Reform
Programme (PUFMARP), a programme that was introduced by the
government, through the Ministry of Finance in July 1995 as a
reform process of its financial management and accounting system
throughout the MDAs.
SNYS:UGBS, 2023 155 15
5
• To ensure strong budget formulation
• To ensure that budgets are owned my the
MDAs/MMDAs
• To ensure effective and efficient budget
monitoring and control
• To provide quality and timely receipt of data on
govt. resources
• To ensure proper accounting and monitoring
systems
• To ensure full compliance with financial policies
and procedures
SNYS:UGBS, 2023 156 15
6
• It is integrated:
• Links recurrent spending to development expenditures to enable
an assessment of the implications of recurrent spending.
• It is broad based:
• Includes IGF, GOG, and donor resources
• It requires prioritizing

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• It is performance based:
• Activities are expected to be planned and cost
with a view to producing outputs that in turn
should achieve objectives
• It addresses MDAs Mission:
• Why they exist, core values, stakeholders, core
business, etc.

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8
• It incorporates an aggregate spending ceiling based on a
consistent and comprehensive macroeconomic framework;
• It presents MDAs’ expenditure estimates on a rolling three-
year basis;
• It classifies the annual spending envelopes under four heads
(Line items):
• Item 1: Personnel emoluments (salaries and pensions);
• Item 2: Administrative expenses;
• Item 3: Service expenditure; and
• Item 4: investment expenditure;

• NB: Presently three line items ( 2 & 3 Combined)

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9
• Therefore under MTEF they are identified as follows:
• Item 1:Compensation payment (salaries, wages, etc)
• Item 2: Goods and Services (Cost of running org.)
and (cost of
rendering services)
• Item 3: Investment Activity Expenses (Cost of dev.
Projects)

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• In public sector, expenditures are generally grouped into two:
recurrent expenditure and capital/development expenditure
• In the context of MTEF, expenditures are divided into two:
• Statutory Payments
• Discretionary Payments

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1
• These include debt payment and statutory transfers.
• Example
• Debt service
• External Interest
• Domestic interest
• Statutory transfers include
• DACF, GETF, Road Fund, Social Security contributions, Pensions,
Gratuities, National Health Insurance Fund

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• The line items (Item 1 to 3)
• There are also five activity sectors under
discretionary payments
• General Administration
• Economic Services
• Infrastructure
• Social Services
• Public Safety

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1. Questioning the Reason for the Existence and activities of
each MDA
This is a means of government funding only the MDAs whose
activities contribute to the meeting of the government’s policies
and needs.

2. Allocating scarce resources to priority areas

Priority areas are agreed by government institutions and the
activities of these areas are costed.

3. Considering all Resources in Aggregate

All revenues available in the form of tax revenues, internally
generated funds, donor supports and other non-tax revenues are
brought together towards the achievement of the agreed purposes
of MDAs.

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4. Considering All Costs in Aggregate
Both recurrent and development expenditures are brought together
in an integrated budget to ensure that all forms of expenditure are
met, especially recurrent costs that arise from investments through
new investments from the development expenditure.

5. Transparency in the costing of policies and the relevant

activities
This ensures that better information is generated from the
financial management system for better decision making by
the government.

6. Stressing on Defining and Measuring

Performance
define and develop performance variables so as to measure
the outputs and outcomes of the MDAs.

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5
7. Matching of Resources to Needs
Total needs as per the priorities of governments are well
identified and resources of government are similarly
identified and the two matched to ensure that there will
be no mismatch; having needs that cannot be matched.

8. Scaling Down Needs by Prioritisation

To be able to match needs to resources, needs are
expected to be scaled down where available resources
are not enough to meet the needs identified – “Cutting
one’s coat according to the available Cloth”.

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• There are seven identifiable steps in the process,
and which is a combination of the top down and
bottom up processes of budget estimations.

• The top down approach has to do with actions from

the Ministry of Finance, Cabinet and the Legislature,
which involves steps 1, 2, 5 and 7. The bottom up
approach involves steps 3, 4 and 6

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• Step1. formulation of a three year
macroeconomic framework, projecting economic
growth rate, domestic revenue generation and donor
funds availability.

• Step 2. Ceilings are identified for each sector

considering the sector priorities of government for the
three years.

• Step 3. The three year expenditure requirements for

the sectors based on government priorities are
projected for MDAs.

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• Step 4: The activities of the MDAs are costed and prioritised for
the three years.

• Step 5: Policy hearings are organised and sector ceilings are revisited at a
higher, possibly cabinet level where medium term sectoral ceilings are
reviewed if necessary.

• Step 6: Detailed three years estimates are prepared based on the

projected costing made of activities and programmes

• Step 7: Final budget hearings are organised for review and final approval
of the three years estimates by the Ministry of Finance and Cabinet.

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• Group the MTEP processes into the Planning and Preparation of
budget, highlighting the major institutions responsible.

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• MTEF falls short of its potential as it tends toward being a
form-filling exercise and it is yet to be established as a tool
for rational allocation of resources, review of priorities, and
decision making.

• The information included in the annual spending estimates

is
overly detailed.

• The preparation process is work intensive and time

consuming, and the voluminous nature of the documentation
(up to forty volumes for the combined MDAs).
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 The Constitution provides the general activities and time lines for the
Ghanaian budget cycle–the President shall cause to be prepared and laid before
Parliament at least one month before the end of the financial year, estimates of
the revenues and expenditure of the Government of Ghana for the following
financial year. –Chapter 13, 179 and 180.

 Appropriations Bill/Act –Passes every fiscal year.

 Other Laws provide additional information:

 PFM Act, 2016
 Financial Administration Regulations (FAR)

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• Authorization of Expenditure
• Article 179(1)
• “The President shall cause to be prepared and laid before
Parliament at least one month before the end of the
financial year, estimates of the revenues and expenditure
of the Government of Ghana for the following financial
year”.

SNYS:UGBS, 2023 173

• Article 179 (2)
• Estimates of the expenditure of all public offices and public
corporations, other than those set up as commercial ventures—
• (a)
• Shall be classified under programmes or activities
• Included in a bill to be known as an Appropriation Bill
• To be introduced into Parliament
• For the issue from the Consolidated Fund or other appropriate
fund

SNYS:UGBS, 2023 174

• Article 179 (2) (b)
• Shall, in respect of payments charged on the Consolidated Fund, be
laid before Parliament for the information of members of Parliament
• Article 179 (3—6): Judiciary
• Estimates of the Administrative and Development Expenditure of the
Judiciary [Chief Justice to the President & to Parliament]
• Article 179 (7): Parliament to Prescribe Procedure for presentation of
the
Appropriation Bills

SNYS:UGBS, 2023 175

• Article 179 (8): Supplementary Budget
• Where amount appropriated is insufficient or no appropriation made
in Budget
• Article 179 (9): Appropriation Bill for Supplementary Budget
• To be presented in the next or ensuing financial year
• Article 179 (10): President may present to Parliament, estimates of
revenues and expenditure for more than one year

SNYS:UGBS, 2023 176

• Article 179 (11): Contingency Fund and other special votes under the
control of Parliament
• Article 180: Expenditure in Advance of Appropriation
• Where a Budget cannot be presented as scheduled above
• Parliament to approve Estimates for up to 3 months of ensuing
Financial Year

SNYS:UGBS, 2023 177

Guidelines for Preparation of Annual Budget [s20]
• PRMA—Consolidation of PFM activities
• Section 20 (1): Role of the Minister
• S20 (a): Minister shall issue guidelines, subject to approval
of Cabinet
• S20 (b): Circulate Guidelines to covered entities not later
than June 30 of every year.

SNYS:UGBS, 2023 178

• Section 20 (2): Budget Guidelines to include:
a) Economic Outlook for the country
b) Revenue forecasts
c) fiscal targets in relation fiscal principles, particularly, need to
achieve sustainable public debt and fiscal balance
d) Medium-term fiscal framework (with assumptions)
e) Multiple year ceilings for each covered entity (in line with
Fiscal Strategy Document—s15)

SNYS:UGBS, 2023 179

• Section 20 (2): Budget Guidelines (cont’d):
g) Reconciliation of any changes in previous Medium Term
Expenditure Framework (MTEF)
h) Selection criteria for investment projects (with links to
forward recurrent expenditure)
i) Ceilings for preparation of the Budget Estimates of local
government authorities

SNYS:UGBS, 2023 180

• Section 20 (2): Budget Guidelines (cont’d):
j) Details: expenditure under statutory funds & alignment
& coordination of statutory funds with fiscal objectives,
targets etc
k) Any other information required from covered entities for
Minister to prepare Budget
• Budget Hearings: MDAs and MMDAs (Composite Budget)
• Compilation of Budget [MOF coordination]

SNYS:UGBS, 2023 181

• An example
• 2019 Budget Guidelines can be obtained from the MOF website

SNYS:UGBS, 2023 182

Approval of Budget by Parliament
• Section 21: Annual Budget: Presentation & Tabling by Minister
• Section 22: Debate & approval of Annual Budget by Parliament
• Standing Orders of Parliament
• Debate, Resolutions & Voting
• Statement of Economic Policy
• Consideration of Estimates by Committees
• Approval of Estimates/Appropriation
SNYS:UGBS, 2023 183
• Section 23: Expenditure in Advance of Appropriation
• President satisfied that Appropriation Act for ensuing year
cannot come into operation
• Seek approval of Parliament (Art. 180 of Constitution)
• Parliament addresses Warrant to Minister to release funds
from Consolidated Fund
• Section 24: Budget Estimates on Gross Basis
• Exception given to Tax Refunds (s24 (2)

SNYS:UGBS, 2023 184

Implementation of Budget/Estimates
• Section 25: Commitment of Approved Budget
• Minister: Within 10 days of approval, issue quarterly ceilings
to Controller & Accountant-General (C&AG)
• C&AG guided accordingly in making Releases to Chief
Spending Officers
• CSOs cannot incur expenditure (including Contingent
Liabilities) beyond approved ceilings
• Entry in GIFMIS (Ghana Integrated Financial Mangement
Information System)
• Section 26: Expiry of Appropriation at close of Financial Year

SNYS:UGBS, 2023 185

Implementation of Budget/Estimates
• Section 27: Performance Report (Principal Account Holders)
• Within 1st Quarter, implementation plan to Minister & Parliament
• Multi-year Investment plan within MTEF
• Matters arising from Auditor-General’s report
• Section 28: Mid-year Review
• Submission to Parliament not later than July 1,
• Macroeconomic performance; revenue, expenditure & financing; revised
budget outlook
• Plans for a Supplementary Budget, if any

SNYS:UGBS, 2023 186

Implementation of Budget/Estimates
• Section 29: Re-allocation of funds from a covered entity
• Section 30: Budget Implementation by Principal Spending
Officer
• Section 31: Cash flow forecast
• Section 32: Virement
• Minister: within amount of money allocated & strict
conditions [s32(3)

SNYS:UGBS, 2023 187

Implementation of Budget/Estimates
• Section 33: Multi-year expenditure commitments
• Commitment only with prior approval of Minister
• Contract Database
• Section 34: Half-yearly reports on Budget implementation
• Submission to Parliament [January and July]
• Section 35: Supplementary Budget
• Section 36: Contingency Fund

SNYS:UGBS, 2023 188

• Other Financial Provisions
• s37-44: Sinking Fund
• s45-53: Cash & Asset Management
• s54-78: Public Debt Management
• Key to Financing of Budget
• S79-88: Accounts and Audit
• s80-81: Accounts to be submitted [details in Schedule]
• Audit Committees [s86-88]

SNYS:UGBS, 2023 189

• Oversight
• S89-95: Oversight of Local Government Authorities; Public
Corporations; and State-owned Enterprises
• Key to Quasi-fiscal management
• Miscellaneous
• s96: Offences & Penalties
• s97: Surcharges
• s98: Penalty for contravention of PFMA
• s99: Waiver of Sovereign Immunity
• s100: Fiscal Impact Analysis of Legislation and Proposals

SNYS:UGBS, 2023 190

• Miscellaneous (cont’d)
• s100: Fiscal Impact Analysis of Legislation and Proposals
• s101: Regulations [FAR holding]
• s102: Interpretation
• s103: Repeals and Savings
• S104: Transitional provisions
• Schedule to Act: Accounts to be submitted [section 80 and 81]
• Controller and Accountant-General (to Minister & Auditor-General)
• Principal Spending Officer (to Accountant-General)

SNYS:UGBS, 2023 191

• Income and Fees Act
• GRA and Tax Legislation
• Procurement laws
• Internal Audit Agency laws
• Auditor-General
• BOG, SEC & other Regulatory Authorities

SNYS:UGBS, 2023 192

 There are four main phases of the budgetary cycle in Ghana:

 Planning and Preparation (Budget Formulation)

 Analysis and approval (Authorisation and Approval)
 Implementation and
 Monitoring, evaluation and auditing

 At any point in time, more than one of these processes take

place simultaneously.
SNYS:UGBS, 2023 193
SNYS:UGBS, 2023 194 19
4
 This involves the collation of inputs from stakeholders and
the preparation of budget estimates in line with
macroeconomic targets on future growth.
 Ministry of Finance (MoF) then finalizes the Budget
Statement after which the Minister for Finance, acting on
behalf of the President, presents it to Parliament, usually in
November.
 The process is preceded by the determination of the
macro-economic framework for the country and some
assumptions
 Circulation of budget circular on the guidelines for the
preparation of sectoral budgets

SNYS:UGBS, 2023 195 19

5
• The assumptions underlining the 2018
Budget are as follows:
• Overall GDP growth rate of 6.8
percent;
• Non-oil GDP growth rate of 5.4
percent;
• End period inflation rate of 8.9
percent;
• Average inflation rate of 9.8 percent;
• Fiscal deficit of 4.5 percent GDP;
• Primary balance (surplus) of 1.6 percent
of GDP; and
• Gross Foreign Assets to cover at least 3.5
months of imports of goods and services
• SNYS:UGBS, 2023
• The assumptions underpinning the 2017
Budget are as follows:
• Overall GDP growth rate of 6.3 percent;
• Non-oil GDP growth rate of 4.6 percent;
• End-year inflation rate of 11.2 percent;
• Average inflation rate of 12.4 percent;
• Overall fiscal deficit of 6.5 percent of
GDP;
• Primary surplus of 0.4 percent of GDP;
• Gross Foreign Assets to cover at least 3
months of imports of goods and services
196 19
6
• This involves the following, but not limited to:
• Development of macro-economic framework (3
year) by the Budget and Research division of MOF
Policy reviews
• Cross- sectoral meetings Policy hearings
• Budget circulars/instructions
• Submission of draft estimates
• Budget hearings
• Re-prioritization
• Final submission to cabinet for conclusions
• See Sample Budget calendar: 2019-2022
SNYS:UGBS, 2023 197 19
7
• After Cabinet have discussed the draft estimates, it is
presented at parliament and forwarded to the relevant
parliamentary select committee for examination
• There are various select committees of Parliament which
handle affairs of different MDAs.
• They discuss the allocations of the various government units
and later lay their report on the floor of parliament.
• Sector Ministers of the government unit are called upon to
table motions before parliament for acceptance of their
allocations.
• After approval for sector allocations, the entire budget is
collated and consolidated into an Appropriation law for
consideration and passed by parliament.
• The presentation is usually done in November

SNYS:UGBS, 2023 198 19

8
• After passing the appropriation bill into law, MOF
then puts the budget together into volumes for
distribution to all MDAs (focusing on the expenditure
items).
• The Minister then issues General warrants with
respect to items 1 and 2 to the CAGD
• The CAGD in turn issues the General Circular which
contains instructions to MDAs and Treasury Officers
about the implementation of the General Warrant
• Also, the CAGD prepares and issues expenditure
warrants (EW)and bank transfer advises (BTA) to all
cost centres.
SNYS:UGBS, 2023 199 19
9
 Generally, the distributional concern is the prime responsibility of
MDAs, while the responsibility of allocation lies in the purview of the
Ministry of Finance.
 Also, the Ministry of Finance and Economic Planning provides a
vigilant supervision of all the MDAs and MMDAs with respect to
budgeting
 MOF monitors the above through the provision of quarterly and
monthly expenditure ceilings and the institutions of sanctions to
departments that exceed their ceilings.
 Expenditure returns from the various MDAs are submitted to the
Expenditure Monitoring Unit of the Ministry of Finance, which then
advises on what actions to take.

SNYS:UGBS, 2023 200 20

0
• Items 3 (investing activities) are traditionally considered as specific
warrants and are issues on application with supporting documents
from MDAs.
• The specific warrant must be obtained before making a
commitment by an MDA.
• The application must include:
• The amount
• Purpose
• Work plan
• Completed activity and expenditure limitation form
• For such item expenditure, the MDA concerned must
have
completed the procurement process.
• Note that the CAGD is again involved as they also have to issues EW
&BTA
• See sample budget implementation instructions
SNYS:UGBS, 2023 201 20
1
• Regular monitoring of MDAs activities in accordance
with:
• programmes, projects and policies stated in the
budget
• Examining the financial reports and activities of the
MDAs to ensure that they spent within the budget and
that all monies were used for the purposes for which
they are given.
• A continuous check, review and reporting of the budget
implementation process to assess progress:
• the set objectives, planned inputs, activities, and
outputs
• Identify areas of variances, isolate the causes and to cause
SNYS:UGBS, 2023 202 20
2
• Financial responsibilities of the head of department are
outlined
• Vote controller of each and every item of expenditure
are to be indicated.
• Feedback mechanisms to be established including
institutional development such as strengthening
budget committees, budget units within MDAs and in
MOF responsible for selective monitoring.
• No financial business can be transacted irrespective of
availability of authority until the CAG has assigned an
account number for the transaction.
SNYS:UGBS, 2023 203 20
3
• At the macro level, the Minister of Finance has to
authorise releases. There are limits to which releases
can be effected by
• The Minister
• Deputy Minister
• The Chief Director
• Director of Budget
• At the Micro/MDA level, the Vote Controller is
responsible for releases (who is the vote controller?).
As part of a control measure, there are Treasury officers
from CAGD posted to various MDAs/MMDAs who are
under the purview of the CAGD in charge of treasuries,
SNYS:UGBS, 2023 204 20
4
• The audit may be internal and external.
• The Internal Audit is a management function and is
currently the responsibility of the IAA but previously
under the purview of the Controller and Accountant-
General’s Department
• MDAs have their internal auditors who certify the
appropriateness of expenditures before they are
incurred
• External auditing is carried out by the Auditor-
General who is independent of the CAGD.
• All copies of warrants, cash release instructions,
appropriations are copied to the Auditor-General.
• Read Regulations, 191 &196 of the FAR and….).
SNYS:UGBS, 2023 20
205
5
• Since 1998, Activity Based Budgeting (ABB)
approach has been used for the preparation of
the National Budget.
• ABB was introduced under the Public Financial
Management Reform Programme (PUFMARP) as part
of wider PFM reforms
• It was intended to bring a stronger performance
focus to MDA budgets by linking strategic objectives
to outputs and activities.

SNYS:UGBS, 2023 206 20

6
• Background:
• 2010 – Pilot with two Ministries
• 2011 - Further rollout of pilot (Oct –Dec ) - 7 MDA’s
• 2012 – Further rollout to 14 other MDA’s (Feb – May)
• 2014 – Full rollout –presentation of PBB to Parliament
• The structure consists of:
• programs,
• subprograms and
• Activities
• It requires that in order to measure results, there should
be:
• Outcomes (measurable and specific)
• Outputs and performance indicators

SNYS:UGBS, 2023 207 20

7
• As a first step, regroup activities with a common
goal and objectives into a spending unit (e.g. Pre-
primary Education, Secondary Education etc.)
• Make explicit the mission of the spending unit
• Identify and name the programme’s activity
structure within each spending unit
• A programme is a group of independent, but closely-
related, activities designed to achieve a common
objective or objectives.
• A programme activity is the means or method of
achieving a programme objective(s).

SNYS:UGBS, 2023 208 20

8
• Distribute all revenues and expenditures according to
program and activities.
• Develop multi-year programme budget expenditure
projections
• Develop programme objectives for current and future
years
• Define programme indicators

SNYS:UGBS, 2023 209 20

9
SNYS:UGBS, 2023 210 21
0
• Aggregate fiscal discipline
• effective control of resources
• Allocative efficiency
• allocating resources according to strategic priorities.
• Operational efficiency
• using resources in such a way that outputs are
maximised.

SNYS:UGBS, 2023 211 21

1
• Program budgets present more useful information on
service delivery & allow for transparency and accountability
in service delivery
• It also more useful for:
• determining whether allocations reflect priorities
• planning the delivery of services
• monitoring the use of resources within each program
• identifying areas where savings can be made or where more funds
are needed

SNYS:UGBS, 2023 212 21

2
• The Ghana Integrated Financial Management
Information System (GIFMIS) was launched in May
2009 as a follow up to the Budget and Public
Expenditure Management System (BPEMS) Project
with funds (US$ 120.51) from:

• The WB (US$28.44m),
• DFID (US$ 15.05m),
• EU ($12.27m) and
• DANIDA ($4.50m).

SNYS:UGBS, 2023 213 21

3
• Institutional Scope
• GIFMIS deployed to all Ministries, Departments and Agencies(MDAs)
and Metropolitan, Municipal and District Assemblies(MMDAs)
• Funds covered by GIFMIS
• Consolidated Fund
• Donor Funds
• Statutory Funds
• IGFs
• Any other public funds
SNYS:UGBS, 2023 214 21
4
• Improved budgetary, financial management (record
Keeping) and reporting processes
• Provide accurate, timely and reliable financial information
to Central Government and Decentralized Institutions and
Organizations
• Uniformity in accounting and reporting with the
introduction of a common Chart of Account and Database
for all MDAs and MMDAs.
• Improvement in accountability, control, monitoring and
auditing of Governmental finances.
• Ensure that Ministries, Department and Agencies
(MDAs/MMDAs) spend within their budgetary
allocation due to budgetary control
• Reduce manual processes, duplication of effort and
errors
SNYS:UGBS, 2023 215 21
5
• Match disbursements with availability of revenues thus
Improve efficiency in cash management and
treasury Management System
• Improve interaction between and among other financial
management players such as Bank of Ghana (BOG) , Public
Procurement Authority (PPA), Ghana Revenue Authority
(GRA), among others
• Enhance enforcement of financial legislation
• Complete and timely exchange of data and information
among/between MDAs/MMDAs and central government
for producing complete, timely and accurate reports
(Improve Record Keeping) etc
SNYS:UGBS, 2023 216 21
6
• Enhance and re-enforce the internal control
systems in public financial management for
accountability.
• Provide documentation of business processes,
workflows and approval levels to ensure consistent
and timely compliance across all MDAs and all
MMDAs.
• An effective and efficient budget preparation,
execution, monitoring and evaluation mechanism
• Provide for the ability to budget for, track and monitor
projects and grants through the chart of accounts, by
using the Project SNYS:UGBS, 2023 217 21
7
• Major financial modules:
• Purchasing - for Purchase Requisition, PO, SRA
• Accounts Payable - for logging Invoices/ PVs,
creating accounting and tracking liabilities,
including multi-year commitments.
• Cash Management- Managing Bank
Account, Bank Transfer, Bank Reconciliation,
Cash Pooling and cash forecasting, etc.
• General Ledger- Repository of all accounts
• Accounts Receivable- for tracking revenue
• Fixed Assets register-for tracking assets
SNYS:UGBS, 2023 218 21
8
• Systems Integrate/Interface with:
• Programme Based Budgeting (PBB)
• Payroll & HuRMIS (PSC)
• CS-DMRS (DMD-MOF)
• E-Monitor (Non-Tax Revenue- MoF)
• PIMS (PID- MoF)
• TRIPS & GCMS (GRA)
• T-24& SWIFT (BoG)
• E-Procurement (Public Procurement Authority)

SNYS:UGBS, 2023 219 21

9
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