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- 10 Marks
Question
The following transactions relate to Tham District Assembly (TDA):
i) The estimated internally generated funds of the Assembly for the fourth quarter of 2021 and the first quarter of 2022 are given below:
| Source of Revenue | Oct 2021 (GH¢’000) | Nov 2021 (GH¢’000) | Dec 2021 (GH¢’000) | Jan 2022 (GH¢’000) | Feb 2022 (GH¢’000) | Mar 2022 (GH¢’000) |
|---|---|---|---|---|---|---|
| Fees and Charges | 300,000 | 320,000 | 310,000 | 400,000 | 450,000 | 420,000 |
| Licenses | 120,000 | 120,000 | 200,000 | 180,000 | 140,000 | 160,000 |
| Property rate | 800,000 | 1,200,000 | 1,000,000 | 900,000 | 900,000 | 1,300,000 |
| Fines and Penalties | 50,000 | 50,000 | 40,000 | 60,000 | 80,000 | 80,000 |
ii) The revenue policy of the Assembly is as follows:
- Fees and Charges: 100% of Fees and Charges are expected to be collected in the month of estimation.
- Licenses: Licenses are collected in the month following the month of estimation.
- Property Rate: Property rates are collected in the third month after the month of estimation.
- Fines and Penalties: Fines and Penalties are collected on the spot.
iii) Experience shows that about 10% of the amount owed in respect to property rate is never received.
iv) Decentralised transfer is estimated at GH¢2,000,000 and GH¢1,800,000 for the first and second quarters of 2022 respectively. The decentralised transfers are often released in the second month of each quarter, except for the first quarter, which is released in the last month.
v) Goods and services are paid two months in arrears. The projected expenses in the Assembly’s 2021 and 2022 budgets are as follows:
| Oct 2021 (GH¢’000) | Nov 2021 (GH¢’000) | Dec 2021 (GH¢’000) | Jan 2022 (GH¢’000) | Feb 2022 (GH¢’000) | Mar 2022 (GH¢’000) |
|---|---|---|---|---|---|
| 365,000 | 280,000 | 280,000 | 290,000 | 200,000 | 320,000 |
vi) The Assembly budgets to acquire equipment and furniture amounting to GH¢300,000,000 in the month of February 2022. It has planned that 50% of the amount will be paid in the month of purchase, and the balance paid equally over the following two months. The equipment and furniture will be depreciated at the rate of 10% per annum.
vii) The cash and cash equivalent balance at the end of the 2021 financial year was GH¢63,000.
Required:
Prepare a Cash Flow Forecast for the first quarter of 2022, showing clearly the forecast for each month and the quarter as a whole. (10 marks)
Answer
Tham District Assembly
Cash Flow Forecast for the First Quarter of 2022
- Tags: Budgeting, Cash Flow Forecast, Payments, Public Sector, Receipts
- Level: Level 2
- Topic: Public sector fiscal planning and budgeting
- Series: JULY 2023
- Uploader: Theophilus