Question Tag: Public Financial Management Act

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  • 10 Marks

AAA – May 2018 – L3 – Q4a – Government external audit and public accountability, Public sector audit

Discuss the Managing Director's refusal to allow auditors to verify performance agreements and the need to establish an Audit Committee under the Public Financial Management Act

a) Sewerage Corporation was established by an Act of Parliament to provide water to Rural Communities. The team of auditors from the Ghana Audit Service demanded to verify the performance agreements made by the company with the state. The Managing Director refused on the grounds that the auditors were over-stepping the scope of their work.

The auditors also discovered that the corporation has not established an Audit Committee (AC), as required by the Public Financial Management Act 2016, Act 921. Management’s response was that AC was not established because it did not see its importance even though it is required by law.

Required: i) Comment on the action of the Managing Director on the performance agreement. (5 marks) ii) Advise the Managing Director on the need to establish an Audit Committee (AC). (5 marks)

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  • 10 Marks

PSAF – May 2019 – L2 – Q3b – Public sector fiscal planning and budgeting

Explain the primary fiscal policy objectives, guiding principles, and post-budget management activities under the Public Financial Management Act.

Budgeting is an important process by which government plans its programmes and activities for a given fiscal period. For a budget to be effective in the delivery of the economic and social agenda of the government, the budgeting process should be linked to the macroeconomic and fiscal policies of the country. No wonder the Public Financial Management Act, 2016 (Act 921) has made extensive provision on macroeconomic and fiscal policies to guide the government in its budget formulation and execution. The budgeting process is preceded by fiscal policy planning to serve as a foundation for the realization of the inspiration of the budget. A national budget is a means to an end and not an end in itself; therefore, it should be controlled and managed holistically to achieve the desired economic, fiscal, and social outcomes. The Minister of Finance, the Principal Account Holders, and Principal Spending Officers are actively involved in post-budget management and control activities at various levels to ensure that the budget targets are achieved.

Required:
i) Explain the primary fiscal policy objective of the government and identify THREE (3) guiding principles in the formulation and implementation of a fiscal policy objective.
(3 marks)

ii) Explain FOUR (4) post-budget management and control activities prescribed under the Public Financial Management Act, 2016 (Act 921).
(4 marks)

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  • 20 Marks

PSAF – May 2020 – L1 – Q2 – Preparation and presentation of financial statements for central government

Prepare the Statement of Financial Performance, Statement of Financial Position, Statement of Budget Information, and Notes to the financial statements for Damsa Municipal Assembly.

Below is the extract from the records of Damsa Municipal Assembly (DMA).

Additional Information:

  1. The central government has a constitutional responsibility to pay all established post salaries of the Assembly from the Consolidated Fund. The established post salaries paid by the central government on behalf of the assembly for 2019 amounted to GH¢64,000,000. This payment has not reflected in the books of DMA.
  2. Office consumables in respect of stationery and other items bought for GH¢1,800,000 remained unused during the year. The current replacement cost of the inventories is GH¢1,050,000. Meanwhile, the net realizable value of the inventories is estimated at GH¢1,400,000. No market exists for unused office consumables and other items.
  3. Consumption of fixed capital is to be charged as follows:
    • Motor vehicles: 5 years
    • Furniture and fittings: 5 years
    • Premises: 10 years
    • Equipment: 8 years
  4. During the year, the following assets were acquired and outright payments made for them: Motor Vehicle GH¢7,000,000; Equipment GH¢4,000,000. These have been accounted for.
  5. DMA could not pay the electricity bill for the last quarter of 2019. This was brought to its attention by the Electricity Company Ltd. of Ghana. The amount involved is GH¢4,000,000.
  6. The government has assigned some young graduates to DMA as part of the Nation Builders Corp programme to support the Assembly in revenue mobilisation. The allowances amounting to GH¢2,000,000 due them from DMA for the last month of the year was outstanding. DMA promises to pay them by the end of the first quarter of 2020.
  7. Fixed deposit attracts interest of 20% per annum and some interest is due as at 31 December 2019.
  8. The market store fees received were for two years: 2019-2020.
  9. During the year, the chiefs and people of the Assembly donated a new vehicle valued at GH¢400,000 to the DMA. No record was made in the books.
  10. Extract of the 2019 Budget of the DMA is as follows:
    Decentralised transfer 185,000
    Compensation of employees 74,300
    Goods and Services 35,600
    Other expenses 1,700
    Internally Generated Funds 102,000
    Donations and grants 1,000

Required: Prepare in accordance with the IPSAS and the Public Financial Management Act, 2016 (Act 921): a) Statement of Financial Performance for the year ended 31 December 2019.
(5 marks)

b) Statement of Financial Position as at 31 December 2019.
(5 marks)

c) Statement of Budget Information in Comparison with Actuals for the year ended 31 December 2019.
(5 marks)

d) Notes to the financial statements.
(5 marks)

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  • 10 Marks

AAA – May 2018 – L3 – Q4a – Government external audit and public accountability, Public sector audit

Discuss the Managing Director's refusal to allow auditors to verify performance agreements and the need to establish an Audit Committee under the Public Financial Management Act

a) Sewerage Corporation was established by an Act of Parliament to provide water to Rural Communities. The team of auditors from the Ghana Audit Service demanded to verify the performance agreements made by the company with the state. The Managing Director refused on the grounds that the auditors were over-stepping the scope of their work.

The auditors also discovered that the corporation has not established an Audit Committee (AC), as required by the Public Financial Management Act 2016, Act 921. Management’s response was that AC was not established because it did not see its importance even though it is required by law.

Required: i) Comment on the action of the Managing Director on the performance agreement. (5 marks) ii) Advise the Managing Director on the need to establish an Audit Committee (AC). (5 marks)

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  • 10 Marks

PSAF – May 2019 – L2 – Q3b – Public sector fiscal planning and budgeting

Explain the primary fiscal policy objectives, guiding principles, and post-budget management activities under the Public Financial Management Act.

Budgeting is an important process by which government plans its programmes and activities for a given fiscal period. For a budget to be effective in the delivery of the economic and social agenda of the government, the budgeting process should be linked to the macroeconomic and fiscal policies of the country. No wonder the Public Financial Management Act, 2016 (Act 921) has made extensive provision on macroeconomic and fiscal policies to guide the government in its budget formulation and execution. The budgeting process is preceded by fiscal policy planning to serve as a foundation for the realization of the inspiration of the budget. A national budget is a means to an end and not an end in itself; therefore, it should be controlled and managed holistically to achieve the desired economic, fiscal, and social outcomes. The Minister of Finance, the Principal Account Holders, and Principal Spending Officers are actively involved in post-budget management and control activities at various levels to ensure that the budget targets are achieved.

Required:
i) Explain the primary fiscal policy objective of the government and identify THREE (3) guiding principles in the formulation and implementation of a fiscal policy objective.
(3 marks)

ii) Explain FOUR (4) post-budget management and control activities prescribed under the Public Financial Management Act, 2016 (Act 921).
(4 marks)

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  • 20 Marks

PSAF – May 2020 – L1 – Q2 – Preparation and presentation of financial statements for central government

Prepare the Statement of Financial Performance, Statement of Financial Position, Statement of Budget Information, and Notes to the financial statements for Damsa Municipal Assembly.

Below is the extract from the records of Damsa Municipal Assembly (DMA).

Additional Information:

  1. The central government has a constitutional responsibility to pay all established post salaries of the Assembly from the Consolidated Fund. The established post salaries paid by the central government on behalf of the assembly for 2019 amounted to GH¢64,000,000. This payment has not reflected in the books of DMA.
  2. Office consumables in respect of stationery and other items bought for GH¢1,800,000 remained unused during the year. The current replacement cost of the inventories is GH¢1,050,000. Meanwhile, the net realizable value of the inventories is estimated at GH¢1,400,000. No market exists for unused office consumables and other items.
  3. Consumption of fixed capital is to be charged as follows:
    • Motor vehicles: 5 years
    • Furniture and fittings: 5 years
    • Premises: 10 years
    • Equipment: 8 years
  4. During the year, the following assets were acquired and outright payments made for them: Motor Vehicle GH¢7,000,000; Equipment GH¢4,000,000. These have been accounted for.
  5. DMA could not pay the electricity bill for the last quarter of 2019. This was brought to its attention by the Electricity Company Ltd. of Ghana. The amount involved is GH¢4,000,000.
  6. The government has assigned some young graduates to DMA as part of the Nation Builders Corp programme to support the Assembly in revenue mobilisation. The allowances amounting to GH¢2,000,000 due them from DMA for the last month of the year was outstanding. DMA promises to pay them by the end of the first quarter of 2020.
  7. Fixed deposit attracts interest of 20% per annum and some interest is due as at 31 December 2019.
  8. The market store fees received were for two years: 2019-2020.
  9. During the year, the chiefs and people of the Assembly donated a new vehicle valued at GH¢400,000 to the DMA. No record was made in the books.
  10. Extract of the 2019 Budget of the DMA is as follows:
    Decentralised transfer 185,000
    Compensation of employees 74,300
    Goods and Services 35,600
    Other expenses 1,700
    Internally Generated Funds 102,000
    Donations and grants 1,000

Required: Prepare in accordance with the IPSAS and the Public Financial Management Act, 2016 (Act 921): a) Statement of Financial Performance for the year ended 31 December 2019.
(5 marks)

b) Statement of Financial Position as at 31 December 2019.
(5 marks)

c) Statement of Budget Information in Comparison with Actuals for the year ended 31 December 2019.
(5 marks)

d) Notes to the financial statements.
(5 marks)

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