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PSAF – May 2021 – L2 – Q3a – Public expenditure and financial accountability framework

Explain the objective of the PEFA framework, its uses, and the sources of information for PEFA assessment.

The Public Expenditure and Financial Accountability (PEFA) Framework has gained worldwide recognition due to its contribution to public financial management discussions. It is one framework that has received acceptance across the globe.

Required:
i) Explain the objective of the PEFA framework. (2 marks)
ii) Discuss FOUR (4) uses or applications of the PEFA Reports. (4 marks)
iii) Explain FOUR (4) sources of information for the PEFA assessment. (4 marks)

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  • 20 Marks

PSAF – Nov 2020 – L2 – Q3 – Public expenditure and financial accountability framework | Financial statements discussion and analysis

Explain the PEFA framework, compute financial ratios for two countries, and analyze their financial performance and position.

a) Public financial management is critical for the successful implementation of government policies and developmental goals. Public financial management is a linchpin that ties together available resources, delivery of services, and achievement of government policy objectives. The need to assess the extent to which public financial management systems operate led to the development of the Public Expenditure and Financial Accountability (PEFA) framework by a coalition of seven international development partners. Since 2001, the PEFA framework has received recognition across the world.

Required:

i) Explain the purpose of the PEFA framework. (3 marks)
ii) Explain the key pillars of an open and orderly public financial management system under the PEFA framework. (7 marks)

b) Country A and Country B are Sub-Saharan African Countries that attained independence around the same period. Presented below are the financial statements of the two countries:

Statement of Financial Performance for the year ended December 31, 2018

Description Country A (GH¢ million) Country B (GH¢ million)
Domestic Tax 26,450 17,000
International trade tax 18,200 21,330
Non-tax revenue 7,500 12,800
Grants 1,300 1,100
Total revenue 53,450 52,230
Compensation for employees 29,800 20,300
Use of goods and services 10,300 14,000
Consumption of fixed capital 240 280
Exchange difference 990 600
Interest 19,660 10,460
Subsidies 510 120
Other expenses 1,600 1,430
Total Expenditure 63,100 47,190
Net Operation Result (9,650) 5,040

Statement of Financial Position as at 31 December 2018

Description Country A (GH¢ million) Country B (GH¢ million)
Non-Current Assets
Property, plant and equipment 2,450 22,400
Equity investment 8,000 5,500
Total Non-Current Assets 10,450 27,900
Current Assets
Receivables 6,700 8,400
Cash and cash equivalent 4,700 18,000
Total Current Assets 11,400 26,400
Total Assets 21,850 54,300
Description Country A (GH¢ million) Country B (GH¢ million)
Funds and Liabilities
Accumulated Fund (80,200) 4,800
Current Liabilities
Payables 6,200 4,100
Trust monies 1,400 900
Domestic debt 16,000 4,500
Total Current Liabilities 23,600 9,500
Non-current Liabilities
Domestic debt 36,000 18,000
External debt 42,450 22,000
Total Non-current Liabilities 78,450 40,000
Total Funds and Liabilities 21,850 54,300

Required:

a) From the information provided, compute for the two countries respectively:
i) Grant to Revenue ratio
ii) Wage Bill to Tax Revenue ratio
iii) Interest to Revenue ratio
iv) Capital Assets ratio
v) Debt to GDP ratio
vi) Capital expenditure per Capita
(4 marks)

b) Based on the result in question (a), write a report discussing and analyzing the financial performance and financial position of the two countries. Include in your report the limitations of the analysis of the two countries. (6 marks)

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  • 10 Marks

PSAF – Mar 2023 – L2 – Q3a – Public expenditure and financial accountability framework

Describes the scope and goals of the Public Expenditure and Financial Accountability (PEFA) framework.

The Public Expenditure and Financial Accountability (PEFA) program was initiated in 2001 by seven international development partners: The European Commission, International Monetary Fund, World Bank, and the governments of France, Norway, Switzerland, and the United Kingdom. PEFA began as a means to harmonize the assessment of PFM across the partner organizations. It subsequently established a standard methodology for PFM diagnostic assessments, the PEFA framework. Since 2001, PEFA has become the acknowledged standard for PFM assessments.

Required:
Describe the scope and goals of the PEFA framework.

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  • 10 Marks

PSAF – Nov 2021 – L2 – Q3a – Public expenditure and financial accountability framework

Distinguish between the Weakest Link Method and the Average Method in scoring PEFA indicators and compute and interpret the results for three indicators.

One important pillar in Public Financial Management is accounting and financial reporting, according to the Public Expenditure and Financial Accountability (PEFA) Framework of 2016. The pillar has three indicators with ten dimensions scored using the Weakest Link Method (M1) and Average Method (M2).

The information below relates to the scoring of the accounting and reporting pillar for Ghana in the 2019-2020 PEFA Report:

Pillar (P1-07) Accounting and Financial Reporting Score
Indicator 1 (P1-07.1) Financial data integrity To be determined
Dimensions (M2) Bank account reconciliation D
Suspense accounts D
Advance accounts A
Financial data integrity process C
Indicator 2 In-year budget reports To be determined
Dimensions (M1) Coverage and comparability of reports B
Timing of in-year budget reports C
Accuracy of in-budget reports B
Indicator 3 Annual financial reports To be determined
Dimensions (M1) Completeness of annual financial report C
Submission of reports for external audit B
Accounting standards D

Required:

i) Distinguish between the weakest link method and the average method of scoring the performance indicators.
(3 marks)

ii) Compute the score for each of the three indicators using the appropriate method of scoring and interpret your result.
(5 marks)

iii) Suggest TWO (2) ways the government can improve its performance in indicator 3: Annual financial reports.
(2 marks)

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  • 10 Marks

PSAF – May 2020 – L1 – Q3a – Public expenditure and financial accountability framework

Explain control objectives in public financial management relevant to the PEFA framework and discuss internal control components.

The Public Expenditure and Financial Accountability (PEFA) framework recognizes the importance of internal control systems in achieving the desired fiscal and budgetary outcomes. Internal control systems play a vital role across every pillar of public financial management. It addresses risk and provides assurance that operations meet the control objectives of the PEFA framework. Therefore, it assesses how effectively the internal control systems operate in the country by making reference to the internal control components developed by other international organizations, specifically the Committee of Sponsoring Organizations (COSO) of the USA.

Required:
i) Explain THREE (3) control objectives in public financial management relevant to the PEFA framework of assessment.
(3 marks)

ii) Discuss FIVE (5) components of internal control in relation to the PEFA Framework.
(5 marks)

iii) Explain TWO (2) limitations of the PEFA Framework for assessing public financial management.
(2 marks)

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  • 10 Marks

PSAF – May 2021 – L2 – Q3a – Public expenditure and financial accountability framework

Explain the objective of the PEFA framework, its uses, and the sources of information for PEFA assessment.

The Public Expenditure and Financial Accountability (PEFA) Framework has gained worldwide recognition due to its contribution to public financial management discussions. It is one framework that has received acceptance across the globe.

Required:
i) Explain the objective of the PEFA framework. (2 marks)
ii) Discuss FOUR (4) uses or applications of the PEFA Reports. (4 marks)
iii) Explain FOUR (4) sources of information for the PEFA assessment. (4 marks)

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  • 20 Marks

PSAF – Nov 2020 – L2 – Q3 – Public expenditure and financial accountability framework | Financial statements discussion and analysis

Explain the PEFA framework, compute financial ratios for two countries, and analyze their financial performance and position.

a) Public financial management is critical for the successful implementation of government policies and developmental goals. Public financial management is a linchpin that ties together available resources, delivery of services, and achievement of government policy objectives. The need to assess the extent to which public financial management systems operate led to the development of the Public Expenditure and Financial Accountability (PEFA) framework by a coalition of seven international development partners. Since 2001, the PEFA framework has received recognition across the world.

Required:

i) Explain the purpose of the PEFA framework. (3 marks)
ii) Explain the key pillars of an open and orderly public financial management system under the PEFA framework. (7 marks)

b) Country A and Country B are Sub-Saharan African Countries that attained independence around the same period. Presented below are the financial statements of the two countries:

Statement of Financial Performance for the year ended December 31, 2018

Description Country A (GH¢ million) Country B (GH¢ million)
Domestic Tax 26,450 17,000
International trade tax 18,200 21,330
Non-tax revenue 7,500 12,800
Grants 1,300 1,100
Total revenue 53,450 52,230
Compensation for employees 29,800 20,300
Use of goods and services 10,300 14,000
Consumption of fixed capital 240 280
Exchange difference 990 600
Interest 19,660 10,460
Subsidies 510 120
Other expenses 1,600 1,430
Total Expenditure 63,100 47,190
Net Operation Result (9,650) 5,040

Statement of Financial Position as at 31 December 2018

Description Country A (GH¢ million) Country B (GH¢ million)
Non-Current Assets
Property, plant and equipment 2,450 22,400
Equity investment 8,000 5,500
Total Non-Current Assets 10,450 27,900
Current Assets
Receivables 6,700 8,400
Cash and cash equivalent 4,700 18,000
Total Current Assets 11,400 26,400
Total Assets 21,850 54,300
Description Country A (GH¢ million) Country B (GH¢ million)
Funds and Liabilities
Accumulated Fund (80,200) 4,800
Current Liabilities
Payables 6,200 4,100
Trust monies 1,400 900
Domestic debt 16,000 4,500
Total Current Liabilities 23,600 9,500
Non-current Liabilities
Domestic debt 36,000 18,000
External debt 42,450 22,000
Total Non-current Liabilities 78,450 40,000
Total Funds and Liabilities 21,850 54,300

Required:

a) From the information provided, compute for the two countries respectively:
i) Grant to Revenue ratio
ii) Wage Bill to Tax Revenue ratio
iii) Interest to Revenue ratio
iv) Capital Assets ratio
v) Debt to GDP ratio
vi) Capital expenditure per Capita
(4 marks)

b) Based on the result in question (a), write a report discussing and analyzing the financial performance and financial position of the two countries. Include in your report the limitations of the analysis of the two countries. (6 marks)

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  • 10 Marks

PSAF – Mar 2023 – L2 – Q3a – Public expenditure and financial accountability framework

Describes the scope and goals of the Public Expenditure and Financial Accountability (PEFA) framework.

The Public Expenditure and Financial Accountability (PEFA) program was initiated in 2001 by seven international development partners: The European Commission, International Monetary Fund, World Bank, and the governments of France, Norway, Switzerland, and the United Kingdom. PEFA began as a means to harmonize the assessment of PFM across the partner organizations. It subsequently established a standard methodology for PFM diagnostic assessments, the PEFA framework. Since 2001, PEFA has become the acknowledged standard for PFM assessments.

Required:
Describe the scope and goals of the PEFA framework.

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You're reporting an error for "PSAF – Mar 2023 – L2 – Q3a – Public expenditure and financial accountability framework"

  • 10 Marks

PSAF – Nov 2021 – L2 – Q3a – Public expenditure and financial accountability framework

Distinguish between the Weakest Link Method and the Average Method in scoring PEFA indicators and compute and interpret the results for three indicators.

One important pillar in Public Financial Management is accounting and financial reporting, according to the Public Expenditure and Financial Accountability (PEFA) Framework of 2016. The pillar has three indicators with ten dimensions scored using the Weakest Link Method (M1) and Average Method (M2).

The information below relates to the scoring of the accounting and reporting pillar for Ghana in the 2019-2020 PEFA Report:

Pillar (P1-07) Accounting and Financial Reporting Score
Indicator 1 (P1-07.1) Financial data integrity To be determined
Dimensions (M2) Bank account reconciliation D
Suspense accounts D
Advance accounts A
Financial data integrity process C
Indicator 2 In-year budget reports To be determined
Dimensions (M1) Coverage and comparability of reports B
Timing of in-year budget reports C
Accuracy of in-budget reports B
Indicator 3 Annual financial reports To be determined
Dimensions (M1) Completeness of annual financial report C
Submission of reports for external audit B
Accounting standards D

Required:

i) Distinguish between the weakest link method and the average method of scoring the performance indicators.
(3 marks)

ii) Compute the score for each of the three indicators using the appropriate method of scoring and interpret your result.
(5 marks)

iii) Suggest TWO (2) ways the government can improve its performance in indicator 3: Annual financial reports.
(2 marks)

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You're reporting an error for "PSAF – Nov 2021 – L2 – Q3a – Public expenditure and financial accountability framework"

  • 10 Marks

PSAF – May 2020 – L1 – Q3a – Public expenditure and financial accountability framework

Explain control objectives in public financial management relevant to the PEFA framework and discuss internal control components.

The Public Expenditure and Financial Accountability (PEFA) framework recognizes the importance of internal control systems in achieving the desired fiscal and budgetary outcomes. Internal control systems play a vital role across every pillar of public financial management. It addresses risk and provides assurance that operations meet the control objectives of the PEFA framework. Therefore, it assesses how effectively the internal control systems operate in the country by making reference to the internal control components developed by other international organizations, specifically the Committee of Sponsoring Organizations (COSO) of the USA.

Required:
i) Explain THREE (3) control objectives in public financial management relevant to the PEFA framework of assessment.
(3 marks)

ii) Discuss FIVE (5) components of internal control in relation to the PEFA Framework.
(5 marks)

iii) Explain TWO (2) limitations of the PEFA Framework for assessing public financial management.
(2 marks)

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