Question Tag: Budget Performance

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  • 20 Marks

PSAF – May 2021 – L2 – Q5a – Public sector fiscal planning and budgeting

Analyze the budget performance of Atuum District Assembly and explain the functions of internal audit under the Public Financial Management Act.

a) Since the creation of Atuum District Assembly (ADA) in 2011, inadequate revenue mobilization has been its major challenge making the Assembly unpopular. The newly appointed District Chief Executive (DCE) is concerned about the effectiveness of the revenue budget system of the Assembly.

Below is the extract of the Revenue Budget of the Assembly for the 2021 financial year:

Revenue Annual Budget (GH¢) Actual to March (GH¢)
Licenses 880,000 244,000
Fees and Miscellaneous charges 3,400,000 890,000
Investment income 600,400 178,000
Property rate 5,400,000 1,310,000
Basic Rate 750,000 120,000
Grants and donations 1,000,000 320,000

The budget allocation over the various items over the quarters is in the ratio of 3:3:2:2. The DCE indicates that the budget reliability measures of Public Expenditure and Financial Accountability (PEFA) are ideal for assessing the budget performance of the Assembly. In the framework, the following interpretation is given to budget outturns:

  • Outturn/variance not greater than 5% is scored as A, indicating very good budget reliability.
  • Outturn higher than 5% but not exceeding 10% is scored B, indicating good budget reliability.
  • Outturn higher than 10% but not exceeding 15% is scored C, indicating average budget reliability.
  • Outturn higher than 15% is scored as D, indicating poor budget reliability.

Note that each revenue item is treated as an indicator under the PEFA framework.

Required:

i) As the Budget Officer, prepare the statement of budget performance for the first quarter of the 2021 financial year, indicating clearly the outturn percentage and the respective scores. (5 marks)
ii) Write a report to the DCE on the budget performance of the Assembly and suggest ways of improving the budget reliability of the Assembly. (6 marks)
iii) Discuss FOUR (4) benefits of effective revenue budgeting in the Assembly. (4 marks)

 

b) In a recent audit committee meeting, there arose a serious disagreement between the Director of Finance and the Chief Internal Auditor concerning the internal audit role in the public sector. The Internal Auditor insists that internal audit’s primary responsibility in the public sector is to carry out intensive pre-audit or to vouch. He concludes that internal audit without pre-audit is useless and unfit for purpose. The Director of Finance opposed this view vehemently, arguing that pre-audit is an old-fashioned practice in the public sector and in the 21st century this should not be encouraged in a forward-looking organization like theirs.

Required:
As a member of the Audit Committee, educate the two key officers of the organization on the functions of the internal audit under the Public Financial Management Act, 2016 (Act 921). (5 marks)

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  • 20 Marks

PSAF – March 2024 – L2 – Q3 – PEFA Framework and Budget Performance Report

Discuss the benefits of the PEFA framework, sources of information for PEFA assessment, and the preparation and interpretation of a budget performance report.

a) The Public Financial Management Regulation, LI 2378 defines Public Financial Management (PFM) as laws, rules, systems, and processes used by the Government to mobilize revenue, allocate public funds, undertake public spending, account for funds, and audit results. In 2001, a group of development partners initiated the Public Expenditure and Financial Accountability (PEFA) framework to assess the status of public financial management at central and local government levels. Since then, Ghana has subjected itself to periodic assessments in an attempt to improve the country’s PFM system.

Required:
i) Discuss FOUR (4) benefits the use of the PEFA framework can bring to a country. (6 marks)
ii) Explain FOUR (4) sources of information for PEFA assessment. (4 marks)

 

b) Budget Performance Report is one of the major accountability provisions under the Public Financial Management laws. Regulation 215(2) of the Public Financial Management Regulation, 2019, LI 2378 provides that each Principal Account Holder shall not later than 31 March of the ensuing year submit an annual budget performance report to parliament. The following is an extract from the GIFMIS platform representing Government of Ghana funding for the Ministry of Sanitation for the year 2023.

Budget Item Annual Appropriation (GH¢’000) YTD Warrant (GH¢’000) YTD Payments (GH¢’000)
Compensation of Employees 25,500 18,280 17,450
Goods and Services 5,000 3,450 3,400
Capital Expenditure 8,780 1,220 550
Total 39,280 22,950 21,400

Required:
i) Explain the meaning of Annual Appropriation and YTD Warrant to the Principal Account Holder of the ministry. (2 marks)
ii) Enumerate TWO (2) issues that should be specified in the Annual Budget Performance Report to be submitted by the Principal Account Holder according to the Regulations 215 of LI 2378. (2 marks)
iii) Prepare a Statement of Budget Performance Report for the year 2023 showing the budget-warrant outturns and warrant utilization rates. (3 marks)
iv) Interpret the budget performance statement in (iii) above to facilitate the Minister’s upcoming meeting with the select committee of parliament as required under the law. (3 marks)

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  • 10 Marks

PSAF – April 2022 – L2 – Q3b – Public sector fiscal planning and budgeting

Prepare a budget performance report and analyze the budget outturn for Nkong District Assembly.

Below is the Revenue and Expenditure Extract of Nkong District Assembly for the year ended 31 December, 2020.

Description Annual Budget (GH¢’ 000) Revised Budget (GH¢’ 000) Actual Performance (GH¢’ 000)
Decentralised Transfer 32,000 35,000 42,000
Internally Generated Fund 56,000 45,000 33,000
Compensation 23,000 20,000 25,700
Goods and Services 13,000 18,000 24,000
Non-Financial Asset 18,000 15,000 12,000

Required:
i) Prepare a Budget Performance Report of Nkong District Assembly based on the extract above. (5 marks)

ii) Write a report analyzing the Budget Outturn while assessing the likely causes of the variances during the year. (5 marks)

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  • 20 Marks

PSAF – May 2021 – L2 – Q5a – Public sector fiscal planning and budgeting

Analyze the budget performance of Atuum District Assembly and explain the functions of internal audit under the Public Financial Management Act.

a) Since the creation of Atuum District Assembly (ADA) in 2011, inadequate revenue mobilization has been its major challenge making the Assembly unpopular. The newly appointed District Chief Executive (DCE) is concerned about the effectiveness of the revenue budget system of the Assembly.

Below is the extract of the Revenue Budget of the Assembly for the 2021 financial year:

Revenue Annual Budget (GH¢) Actual to March (GH¢)
Licenses 880,000 244,000
Fees and Miscellaneous charges 3,400,000 890,000
Investment income 600,400 178,000
Property rate 5,400,000 1,310,000
Basic Rate 750,000 120,000
Grants and donations 1,000,000 320,000

The budget allocation over the various items over the quarters is in the ratio of 3:3:2:2. The DCE indicates that the budget reliability measures of Public Expenditure and Financial Accountability (PEFA) are ideal for assessing the budget performance of the Assembly. In the framework, the following interpretation is given to budget outturns:

  • Outturn/variance not greater than 5% is scored as A, indicating very good budget reliability.
  • Outturn higher than 5% but not exceeding 10% is scored B, indicating good budget reliability.
  • Outturn higher than 10% but not exceeding 15% is scored C, indicating average budget reliability.
  • Outturn higher than 15% is scored as D, indicating poor budget reliability.

Note that each revenue item is treated as an indicator under the PEFA framework.

Required:

i) As the Budget Officer, prepare the statement of budget performance for the first quarter of the 2021 financial year, indicating clearly the outturn percentage and the respective scores. (5 marks)
ii) Write a report to the DCE on the budget performance of the Assembly and suggest ways of improving the budget reliability of the Assembly. (6 marks)
iii) Discuss FOUR (4) benefits of effective revenue budgeting in the Assembly. (4 marks)

 

b) In a recent audit committee meeting, there arose a serious disagreement between the Director of Finance and the Chief Internal Auditor concerning the internal audit role in the public sector. The Internal Auditor insists that internal audit’s primary responsibility in the public sector is to carry out intensive pre-audit or to vouch. He concludes that internal audit without pre-audit is useless and unfit for purpose. The Director of Finance opposed this view vehemently, arguing that pre-audit is an old-fashioned practice in the public sector and in the 21st century this should not be encouraged in a forward-looking organization like theirs.

Required:
As a member of the Audit Committee, educate the two key officers of the organization on the functions of the internal audit under the Public Financial Management Act, 2016 (Act 921). (5 marks)

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  • 20 Marks

PSAF – March 2024 – L2 – Q3 – PEFA Framework and Budget Performance Report

Discuss the benefits of the PEFA framework, sources of information for PEFA assessment, and the preparation and interpretation of a budget performance report.

a) The Public Financial Management Regulation, LI 2378 defines Public Financial Management (PFM) as laws, rules, systems, and processes used by the Government to mobilize revenue, allocate public funds, undertake public spending, account for funds, and audit results. In 2001, a group of development partners initiated the Public Expenditure and Financial Accountability (PEFA) framework to assess the status of public financial management at central and local government levels. Since then, Ghana has subjected itself to periodic assessments in an attempt to improve the country’s PFM system.

Required:
i) Discuss FOUR (4) benefits the use of the PEFA framework can bring to a country. (6 marks)
ii) Explain FOUR (4) sources of information for PEFA assessment. (4 marks)

 

b) Budget Performance Report is one of the major accountability provisions under the Public Financial Management laws. Regulation 215(2) of the Public Financial Management Regulation, 2019, LI 2378 provides that each Principal Account Holder shall not later than 31 March of the ensuing year submit an annual budget performance report to parliament. The following is an extract from the GIFMIS platform representing Government of Ghana funding for the Ministry of Sanitation for the year 2023.

Budget Item Annual Appropriation (GH¢’000) YTD Warrant (GH¢’000) YTD Payments (GH¢’000)
Compensation of Employees 25,500 18,280 17,450
Goods and Services 5,000 3,450 3,400
Capital Expenditure 8,780 1,220 550
Total 39,280 22,950 21,400

Required:
i) Explain the meaning of Annual Appropriation and YTD Warrant to the Principal Account Holder of the ministry. (2 marks)
ii) Enumerate TWO (2) issues that should be specified in the Annual Budget Performance Report to be submitted by the Principal Account Holder according to the Regulations 215 of LI 2378. (2 marks)
iii) Prepare a Statement of Budget Performance Report for the year 2023 showing the budget-warrant outturns and warrant utilization rates. (3 marks)
iv) Interpret the budget performance statement in (iii) above to facilitate the Minister’s upcoming meeting with the select committee of parliament as required under the law. (3 marks)

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  • 10 Marks

PSAF – April 2022 – L2 – Q3b – Public sector fiscal planning and budgeting

Prepare a budget performance report and analyze the budget outturn for Nkong District Assembly.

Below is the Revenue and Expenditure Extract of Nkong District Assembly for the year ended 31 December, 2020.

Description Annual Budget (GH¢’ 000) Revised Budget (GH¢’ 000) Actual Performance (GH¢’ 000)
Decentralised Transfer 32,000 35,000 42,000
Internally Generated Fund 56,000 45,000 33,000
Compensation 23,000 20,000 25,700
Goods and Services 13,000 18,000 24,000
Non-Financial Asset 18,000 15,000 12,000

Required:
i) Prepare a Budget Performance Report of Nkong District Assembly based on the extract above. (5 marks)

ii) Write a report analyzing the Budget Outturn while assessing the likely causes of the variances during the year. (5 marks)

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