Topic: The Budgeting Process in the Public Sector

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PSAF – Nov 2014 – L2 – Q2 – The Budgeting Process in the Public Sector

Examination of government budgeting purposes, budget types, and factors affecting budget implementation in Nigeria.

Question

In all Government units, the executive arm prepares the budget and submits the same to the legislative arm for review, modifications, and approval. The approved budget serves as a basis for the activities of that government unit for the fiscal year under focus.

Required:

a. Explain any TWO main purposes which a government budget serves. (2 Marks)
b. Explain any THREE basic features of each of the following budget concepts:

i. Performance budgeting. (6 Marks)
ii. Zero-based budgeting. (6 Marks)

c. Nigeria is said to be low in budget implementation. Discuss any THREE key factors that negate efficient and effective budget implementation in the Nigerian public sector. (6 Marks)

Answer

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Tags: Budget Efficiency, Budget Implementation, Government Budget, Nigerian Public Sector, Performance Budgeting, Zero-Based Budgeting
Level: Level 2

Topic: The Budgeting Process in the Public Sector

PSAF – May 2021 – L2 – Q6b – The Budgeting Process in the Public Sector

Explanation of budget uses and steps for National Chart of Accounts application in public budgeting.

Question

The importance of classification code as a system driven for budget cannot
be over emphasised as it forms the basis for budgeting and budgetary
control mechanism. Thus, for a country, state or local government to
achieve a reasonable level of success in accountability, transparency,
performance evaluation and adherence to Appropriation Act, the
application of unified chart of accounts is paramount.

Required:

Discuss FOUR uses of budget and FOUR steps to be followed to ensure completeness of using the National Chart of Accounts for budgeting.

Answer

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Tags: Accountability, Budget Classification, Budget Completeness, Chart of Accounts, Transparency
Level: Level 2

Topic: The Budgeting Process in the Public Sector
Series: MAY 2021

PSAF – May 2021 – L2 – Q4a – The Budgeting Process in the Public Sector

Explanation of MTEF, Budget Call Circular, and their main differences for public sector budgeting.

Question

As the Accountant in charge of the expenditure division, you are to assist the Director of Finance in the ministry to set up a budget committee. You have also been asked to review the recently issued 2020 Budget Call Circular.

Required:

Explain briefly the following:

Medium Term Expenditure Framework (MTEF) including FOUR of its objectives (6 Marks)
Budget Call Circular (2 Marks)
The main difference between MTEF and Budget Call Circular (2 Marks)

Answer

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Tags: Budget Call Circular, Budgeting Process, Fiscal Policy, Government Expenditure, MTEF
Level: Level 2

Topic: Government Expenditure, Regulatory and Institutional Framework, The Budgeting Process in the Public Sector
Series: MAY 2021

PSAF – May 2024 – L2 – SA – Q1 – The Budgeting Process in the Public Secto

Cash budget preparation and analysis of budgeting systems.

Question

The University of Okoko Consultancy Unit (Uniko Consult) provides training courses for staff, public and private individuals. The consultancy unit is currently collating information for its budget for the six months ending December 31, 2021. The following information is available:

(i) Provisional bookings for courses:

	July	Aug	Sept	Oct	Nov	Dec
Number of courses	0	2	4	3	4	4
Average number of attendees per course	0	16	8	16	8	12

No courses are run during the month of July. Uniko Consult requires intending participants to confirm their attendance in the week prior to the course, giving their credit card number as a guarantee. On average, 75% of provisional bookings are confirmed and therefore result in fee payment.

(ii) Course prices:
Each course lasts for three days, running from Friday to Sunday. The fee for each course is N120,000 per attendee. Any returning participant will be given a 25% discount on the fee. One in three of confirmed bookings is from a returning participant.

(iii) Personnel costs:
The courses are delivered by an experienced team of professors led by Emeritus Professor Omopinleola, who charges Uniko Consult N300,000 for each course. His assistant, Dr. Chukwuma, is paid a wage of N50,000 per course. Uniko Consult has several part-time support staff. Wages costs for July are only N100,000 per month, but every month thereafter amounts to N400,000. The consult is planning to increase wages by 5% from September. All staff are paid at the end of each month.

(iv) Property costs:
The University owns a Researchers’ Lodge, which includes an office, a kitchen, and two conference rooms. Uniko Consult rents the Researchers’ Lodge at a rental cost of N2,400,000 per annum, with rents being paid quarterly in advance on March 31, June 30, September 30, and December 31. However, the Consultancy Unit has received notice from the Bursar stating that, with effect from December 31, 2021, annual rental payments will increase by 5%.

(v) Food costs (Tea break and lunch):
All food items purchased are organic and delivered weekly by Uniko Farms. On the 5th of each month, Uniko Consult pays the bill for the previous month’s food deliveries. In December, Uniko Consult is also required to settle its bill for December due to the two-week holiday taken by Uniko Farm in January. The cost for food on each training course is N5,000 per attendee. However, inflation of 2% per month is expected from September onwards. Food costs for June 2021 are expected to be N110,000.

(vi) General overheads:
Uniko Consult’s annual running costs are N835,000, paid in ten equal instalments from April to January each year. Fuel costs of N420,000 per annum are paid through monthly direct debits. Due to a systems error, the direct debits from January to April failed, so the payment for July will include these outstanding amounts.

(vii) Capital expenditure:
Uniko Consult needs to replace three air conditioners by August at a cost of N180,000 each, with a 10% discount negotiated. The supplier allows the payment in two instalments—one in August and the other in October.

(viii) Bank account:
The balance on the Consultancy’s bank account is expected to be zero on June 30, 2021, but it has an adequate overdraft facility to cover any cash deficit.

(ix) Remittances:
The Consultancy Unit must remit 50% of its cash balance to the University’s account on a half-yearly basis.

Required:

a. Prepare a cash budget for each of the six months ending December 31, 2021.
Note: All workings should be rounded to the nearest N000. (20 Marks)

b. Enumerate the steps involved in Planning, Programming, and Budgeting Systems (PPBS). (7 Marks)

c. State and explain THREE characteristics of the performance budgeting system. (3 Marks)

Answer

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Tags: Cash Budget, Government Finance, Public Sector Accounting
Level: Level 2

Topic: The Budgeting Process in the Public Sector
Series: MAY 2024

PSAF – May 2022 – L2 – SA – Q1 – The Budgeting Process in the Public Sector

Prepare proposed budget estimates for 2021-2023 based on actual and approved estimates for the year 2020.

Question

The ministry of finance of Ojaja Republic prepared the aggregate Medium-Term Expenditure-Framework (MTEF) budget for consideration by the National Assembly as contained in the country’s Constitution. The following are the MTEF actual budget estimates and the approved budget estimates by various sectors as thoroughly screened by the Budget Committees of the Senate and House of Representatives:

Ojaja Federal Republic Summary of total budgeted expenditure by sector for 2020

Sector Code	Sector Name	Actual Estimates 2020 (N’m)	Approved Estimates 2020 (N’m)
01	Administrative Sector
	Personnel Cost	40,000	34,000
	Overhead Cost	25,000	21,250
	Consolidated Revenue Charges	18,600	15,810
	Capital Expenditure	62,400	53,040
	Sub-Total	146,000	124,100
02	Economic Sector
	Personnel Cost	22,500	20,250
	Overhead Cost	12,600	11,340
	Consolidated Revenue Charges	28,600	25,740
	Capital Expenditure	41,300	37,170
	Sub-Total	105,000	94,500
03	Law and Justice Sector
	Personnel Cost	15,800	15,800
	Overhead Cost	20,200	20,200
	Consolidated Revenue Charges	17,500	17,500
	Capital Expenditure	38,500	38,500
	Sub-Total	92,000	92,000
04	Regional Sector
	Personnel Cost	40,800	38,760
	Overhead Cost	22,200	21,090
	Consolidated Revenue Charges	16,700	15,865
	Capital Expenditure	32,300	30,685
	Sub-Total	112,000	106,400

Summary of total expenditure by sectors:

Description	Actual Estimates 2020 (N’m)	Approved Estimates 2020 (N’m)
Personnel Cost	119,100	108,810
Overhead Cost	80,000	73,880
Consolidated Revenue Charges	81,400	74,915
Capital Expenditure	174,500	159,395
Total	455,000	417,000

Additional Information:
(i) Administrative sector – all costs at an incremental basis of 15%, except for capital expenditure which will increase by 10%.
(ii) Economic sector – all costs at an incremental basis of 25%, except for overhead cost which will decrease by 5%.
(iii) Law and justice sector – all costs at a declining basis of 5%, except for personnel cost which will increase by 10%.
(iv) Regional sector – all costs at an incremental basis of 10%, except for consolidated revenue charges which will decrease by 15%.

Required:
a. Prepare proposed budget estimates for 2021, 2022, and 2023 based on the approved estimates for the year 2020. (20 Marks)
b. Explain the following in relation to National Chart of Accounts (NCOA) structure for budgeting:
i. Functional segment (2 Marks)
ii. Programme segment (2 Marks)
iii. Geographical segment (2 Marks)
c. Enumerate FOUR steps required for budgeting with the National Chart of Accounts. (4 Marks)

Answer

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Tags: Budgeting, Government Accounting, National Chart of Accounts, Public Expenditure, Public Finance
Level: Level 2

Topic: The Budgeting Process in the Public Sector
Series: MAY 2022

PSA&F – Nov 2019 – L2 – Q2a – The Budgeting Process in the Public Sector

Comparison of incremental and zero-based budgeting and explanation of zero-based budget stages.

Question

With continuing pressure to control costs and maintain efficiency, the time has come for all public sector organisations to embrace zero-based budgeting. There is no longer a place for incremental budgeting in any organisation, particularly those in public sector, where zero-based budgeting is far more suitable.

Required:

Explain the terms ‘incremental budgeting’ and ‘zero-based budgeting.’
Identify the five main stages involved in preparing zero-based budgets.

Answer

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Tags: Budgeting Process, Incremental Budgeting, Public Sector Efficiency, Zero-Based Budgeting
Level: Level 2

Topic: The Budgeting Process in the Public Sector
Series: NOV 2019

PSAF – Nov 2016 – L2 – Q3 – The Budgeting Process in the Public Sector

This question covers the preparation of a cash flow projection for the first quarter of 2015 for a housing corporation, alongside an analysis of recurrent expenditure.

Question

The Atlantic Staff Housing Corporation is preparing its budget for 2015. You have been engaged as a Consultant to the Corporation to assist in the preparation of the budget. The following information has been made available:

The total annual subventions from the Federal Government in 2014 was N36,000,000. There is an expectation that this amount will increase by 10% in the year 2015. The expected 10% increase will be received in the first six months of the year along with the normal monthly allocations.
The management has decided to reduce transport and travelling by 5% in the year 2015. The total amount in 2014 was N3,780,000, and the expense will accrue evenly throughout the year.
Capital grant of N14 million is expected in February, May, and November.
Salaries and wages for 2014 were N28 million. In 2015, salaries and wages will increase by 12.5% of the amount paid in 2014. Housing allowance is 33% of salaries and wages.
Ground rent for industrial estates will be received as follows: January N2.8 million, February N1.5 million, and March N2.08 million.
The training and development expenses of N700,000 are to increase by 10% in the year 2015. The total amount will be spent on an equal basis in February and October 2015.

The Corporation will commence construction of 100 low-cost housing units in the year 2015. The following are the commitments through LPOs in 2014, which will be met in the New Year:

Date Purchased	Particulars	LPOs	Time to Pay	Amount (N’Million)
15/08/2014	Cement	121	February	9.5
15/09/2014	Iron-rod	111	March	2.8
31/10/2014	Gravels	120	30/01/2015	1.5
01/11/2014	Plumbing Materials	122	20/02/2015	0.75
05/12/2014	Sands	119	March	1.2513

Rent receivable from the shopping complex of the Corporation will be: January N1.7 million, February N1.5 million, and March N2.5 million.
The cash balance as of December 31, 2014, was N1.5 million.

Required:

a. Prepare a cash flow projection for the first quarter of the year 2015.
(15 Marks)

b. Calculate the ratio of recurrent expenditure to total inflow for each month and make a brief comment on the ratio.
(5 Marks)
(Total 20 Marks)

Answer

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Tags: Budgeting, Capital Grant, Cash Flow, Government Subvention, Recurrent Expenditure
Level: Level 2

Topic: The Budgeting Process in the Public Sector
Series: NOV 2016

PSAF – Nov 2020 – L2 – Q4a – The Budgeting Process in the Public Sector

Prepare a monthly cash budget for the fishpond from January to March 2020, considering expected sales, purchases, and allocation.

Question

The Chairman of Okoko Local Government set up pond farming to fulfill a campaign promise. However, the Chairman is concerned about the project’s viability and its ability to finance itself due to increasing production costs. The expected cash-in-hand as of January 1, 2020, is N3,300,000.

The following information concerns the budgeted sales and purchases of the fish farm.

Month	Sales (N’000)	Purchases (N’000)
November 2019	55,000	35,000
December 2019	100,000	55,000
January 2020	114,000	75,000
February 2020	142,000	95,000
March 2020	145,000	80,000

Analysis of records shows that debtors settle according to the following pattern:

70% within the month of sale
30% in the following month

All purchases are on credit. Past experience shows that 80% of the purchase costs are settled in the month of the transaction, and the balance is settled in the subsequent month. Overhead costs amounting to 65% of the purchases of the month are to be paid monthly. Additionally, the Local Government will receive a monthly allocation of N15,000,000.

Required:

Prepare for the Chairman of Okoko Local Government a monthly cash budget for the fish pond for the first quarter (January to March) of 2020. (10 Marks)

Answer

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Tags: Budgeting, Cash Budget, Debtors, Fish Farm, Monthly Allocation, Purchases
Level: Level 2

Topic: The Budgeting Process in the Public Sector
Series: NOV 2020

PSAF – Nov 2020 – L2 – Q3a – The Budgeting Process in the Public Sector

Explain the factors militating against the budgeting system in the public sector.

Question

The budgeting process is a cycle of events which occur sequentially every
year and which results in the approved budgets in ministries and extra ministerial departments.

Required:
Explain five factors militating against the budgeting system in the public sector.

Answer

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Tags: Budget Process, Government Expenditure, Public Sector Budgeting
Level: Level 2

Topic: The Budgeting Process in the Public Sector
Series: NOV 2020

PSAF – Nov 2014 – L2 – Q2 – The Budgeting Process in the Public Sector

Examination of government budgeting purposes, budget types, and factors affecting budget implementation in Nigeria.

Question

Required:

a. Explain any TWO main purposes which a government budget serves. (2 Marks)
b. Explain any THREE basic features of each of the following budget concepts:

i. Performance budgeting. (6 Marks)
ii. Zero-based budgeting. (6 Marks)

c. Nigeria is said to be low in budget implementation. Discuss any THREE key factors that negate efficient and effective budget implementation in the Nigerian public sector. (6 Marks)

Answer

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Tags: Budget Efficiency, Budget Implementation, Government Budget, Nigerian Public Sector, Performance Budgeting, Zero-Based Budgeting
Level: Level 2

Topic: The Budgeting Process in the Public Sector

PSAF – May 2021 – L2 – Q6b – The Budgeting Process in the Public Sector

Explanation of budget uses and steps for National Chart of Accounts application in public budgeting.

Question

Required:

Discuss FOUR uses of budget and FOUR steps to be followed to ensure completeness of using the National Chart of Accounts for budgeting.

Answer

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Tags: Accountability, Budget Classification, Budget Completeness, Chart of Accounts, Transparency
Level: Level 2

Topic: The Budgeting Process in the Public Sector
Series: MAY 2021

PSAF – May 2021 – L2 – Q4a – The Budgeting Process in the Public Sector

Explanation of MTEF, Budget Call Circular, and their main differences for public sector budgeting.

Question

Required:

Explain briefly the following:

Medium Term Expenditure Framework (MTEF) including FOUR of its objectives (6 Marks)
Budget Call Circular (2 Marks)
The main difference between MTEF and Budget Call Circular (2 Marks)

Answer

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Tags: Budget Call Circular, Budgeting Process, Fiscal Policy, Government Expenditure, MTEF
Level: Level 2

Topic: Government Expenditure, Regulatory and Institutional Framework, The Budgeting Process in the Public Sector
Series: MAY 2021

PSAF – May 2024 – L2 – SA – Q1 – The Budgeting Process in the Public Secto

Cash budget preparation and analysis of budgeting systems.

Question

(i) Provisional bookings for courses:

	July	Aug	Sept	Oct	Nov	Dec
Number of courses	0	2	4	3	4	4
Average number of attendees per course	0	16	8	16	8	12

(viii) Bank account:
The balance on the Consultancy’s bank account is expected to be zero on June 30, 2021, but it has an adequate overdraft facility to cover any cash deficit.

(ix) Remittances:
The Consultancy Unit must remit 50% of its cash balance to the University’s account on a half-yearly basis.

Required:

a. Prepare a cash budget for each of the six months ending December 31, 2021.
Note: All workings should be rounded to the nearest N000. (20 Marks)

b. Enumerate the steps involved in Planning, Programming, and Budgeting Systems (PPBS). (7 Marks)

c. State and explain THREE characteristics of the performance budgeting system. (3 Marks)

Answer

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Tags: Cash Budget, Government Finance, Public Sector Accounting
Level: Level 2

Topic: The Budgeting Process in the Public Sector
Series: MAY 2024

PSAF – May 2022 – L2 – SA – Q1 – The Budgeting Process in the Public Sector

Prepare proposed budget estimates for 2021-2023 based on actual and approved estimates for the year 2020.

Question

Ojaja Federal Republic Summary of total budgeted expenditure by sector for 2020

Sector Code	Sector Name	Actual Estimates 2020 (N’m)	Approved Estimates 2020 (N’m)
01	Administrative Sector
	Personnel Cost	40,000	34,000
	Overhead Cost	25,000	21,250
	Consolidated Revenue Charges	18,600	15,810
	Capital Expenditure	62,400	53,040
	Sub-Total	146,000	124,100
02	Economic Sector
	Personnel Cost	22,500	20,250
	Overhead Cost	12,600	11,340
	Consolidated Revenue Charges	28,600	25,740
	Capital Expenditure	41,300	37,170
	Sub-Total	105,000	94,500
03	Law and Justice Sector
	Personnel Cost	15,800	15,800
	Overhead Cost	20,200	20,200
	Consolidated Revenue Charges	17,500	17,500
	Capital Expenditure	38,500	38,500
	Sub-Total	92,000	92,000
04	Regional Sector
	Personnel Cost	40,800	38,760
	Overhead Cost	22,200	21,090
	Consolidated Revenue Charges	16,700	15,865
	Capital Expenditure	32,300	30,685
	Sub-Total	112,000	106,400

Summary of total expenditure by sectors:

Description	Actual Estimates 2020 (N’m)	Approved Estimates 2020 (N’m)
Personnel Cost	119,100	108,810
Overhead Cost	80,000	73,880
Consolidated Revenue Charges	81,400	74,915
Capital Expenditure	174,500	159,395
Total	455,000	417,000

Answer

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Tags: Budgeting, Government Accounting, National Chart of Accounts, Public Expenditure, Public Finance
Level: Level 2

Topic: The Budgeting Process in the Public Sector
Series: MAY 2022

PSA&F – Nov 2019 – L2 – Q2a – The Budgeting Process in the Public Sector

Comparison of incremental and zero-based budgeting and explanation of zero-based budget stages.

Question

Required:

Explain the terms ‘incremental budgeting’ and ‘zero-based budgeting.’
Identify the five main stages involved in preparing zero-based budgets.

Answer

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Tags: Budgeting Process, Incremental Budgeting, Public Sector Efficiency, Zero-Based Budgeting
Level: Level 2

Topic: The Budgeting Process in the Public Sector
Series: NOV 2019

PSAF – Nov 2016 – L2 – Q3 – The Budgeting Process in the Public Sector

This question covers the preparation of a cash flow projection for the first quarter of 2015 for a housing corporation, alongside an analysis of recurrent expenditure.

Question

The total annual subventions from the Federal Government in 2014 was N36,000,000. There is an expectation that this amount will increase by 10% in the year 2015. The expected 10% increase will be received in the first six months of the year along with the normal monthly allocations.
The management has decided to reduce transport and travelling by 5% in the year 2015. The total amount in 2014 was N3,780,000, and the expense will accrue evenly throughout the year.
Capital grant of N14 million is expected in February, May, and November.
Salaries and wages for 2014 were N28 million. In 2015, salaries and wages will increase by 12.5% of the amount paid in 2014. Housing allowance is 33% of salaries and wages.
Ground rent for industrial estates will be received as follows: January N2.8 million, February N1.5 million, and March N2.08 million.
The training and development expenses of N700,000 are to increase by 10% in the year 2015. The total amount will be spent on an equal basis in February and October 2015.

The Corporation will commence construction of 100 low-cost housing units in the year 2015. The following are the commitments through LPOs in 2014, which will be met in the New Year:

Date Purchased	Particulars	LPOs	Time to Pay	Amount (N’Million)
15/08/2014	Cement	121	February	9.5
15/09/2014	Iron-rod	111	March	2.8
31/10/2014	Gravels	120	30/01/2015	1.5
01/11/2014	Plumbing Materials	122	20/02/2015	0.75
05/12/2014	Sands	119	March	1.2513

Rent receivable from the shopping complex of the Corporation will be: January N1.7 million, February N1.5 million, and March N2.5 million.
The cash balance as of December 31, 2014, was N1.5 million.

Required:

a. Prepare a cash flow projection for the first quarter of the year 2015.
(15 Marks)

b. Calculate the ratio of recurrent expenditure to total inflow for each month and make a brief comment on the ratio.
(5 Marks)
(Total 20 Marks)

Answer

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Tags: Budgeting, Capital Grant, Cash Flow, Government Subvention, Recurrent Expenditure
Level: Level 2

Topic: The Budgeting Process in the Public Sector
Series: NOV 2016

PSAF – Nov 2020 – L2 – Q4a – The Budgeting Process in the Public Sector

Prepare a monthly cash budget for the fishpond from January to March 2020, considering expected sales, purchases, and allocation.

Question

The following information concerns the budgeted sales and purchases of the fish farm.

Month	Sales (N’000)	Purchases (N’000)
November 2019	55,000	35,000
December 2019	100,000	55,000
January 2020	114,000	75,000
February 2020	142,000	95,000
March 2020	145,000	80,000

Analysis of records shows that debtors settle according to the following pattern:

70% within the month of sale
30% in the following month

Required:

Prepare for the Chairman of Okoko Local Government a monthly cash budget for the fish pond for the first quarter (January to March) of 2020. (10 Marks)

Answer

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Tags: Budgeting, Cash Budget, Debtors, Fish Farm, Monthly Allocation, Purchases
Level: Level 2

Topic: The Budgeting Process in the Public Sector
Series: NOV 2020

PSAF – Nov 2020 – L2 – Q3a – The Budgeting Process in the Public Sector

Explain the factors militating against the budgeting system in the public sector.

Question

The budgeting process is a cycle of events which occur sequentially every
year and which results in the approved budgets in ministries and extra ministerial departments.

Required:
Explain five factors militating against the budgeting system in the public sector.

Answer

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Tags: Budget Process, Government Expenditure, Public Sector Budgeting
Level: Level 2