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  • 4 Marks

PSAF – Nov 2016 – L2 – Q4d – Public expenditure and financial accountability framework

Discuss methods used by the government to ensure the success of financial reforms in the public sector.

As a means to ensure strong financial management in the public sector and citizen confidence in public institutions, the government has introduced a number of financial reforms including International Public Sector Accounting Standards (IPSAS) in public financial management.Required:
Discuss FOUR methods used by government to ensure the success of these reforms.
(4 marks)

i) Establishment of appropriate legal framework;
ii) Orientation of stakeholders towards new reforms and technologies;
iii) Capacity building of management and staff of public entities;
iv) Structural changes to effectively and efficiently integrate new reforms into mainstream activities of MDAs;
v) Strict enforcement of laws through monitoring, evaluation, and sanctions;
vi) Political support of government and development partners.
(4 points for 4 marks)

  • 20 Marks

PSAF – Nov 2016 – L2 – Q1a – Preparation and presentation of financial statements for central government

Prepare the Statement of Financial Performance and the Statement of Financial Position for the Consolidated Fund as of 31 December 2014 under accrual basis, in compliance with IPSAS.

Below is the Trial Balance of the Consolidated Fund for the year ended 31 December 2014.

Additional Information:
i) It is the policy of Controller and Accountant General to adopt the accrual basis of preparing the public accounts of the Consolidated Fund for the first time in compliance with the Financial Administration Regulation 2004 and the International Public Sector Accounting Standards (IPSAS). The effective date is 31 December 2014.
ii) The current Chart of Accounts based on the GFS 2001 is used in the classification of revenues and expenditures.
iii) Consumption of fixed capital charged on cost for the year has been computed as GH¢156,000,000.
iv) Direct tax revenues due to government but were not received at 31 December 2014 amounted to GH¢49,000,000.
v) An established post salary in arrears as a result of salary increment in the fourth quarter of 2014 was GH¢56,000,000 and goods and services outstanding at the end of the year amounted to GH¢12,000,000.
vi) The grant shown in the trial balance as expenditure represents a statutory transfer to the District Assembly Common Fund (DACF). Any arrears in the DACF should be treated as payable. The current rate of transfer is 7.5% on the amount received.
vii) Public debt interest of GH¢14,000,000 was due to creditors but was not paid as at 31 December 2014.

Required:
a) Prepare in a form suitable for publication and in accordance with the relevant Financial Laws and IPSAS:
i) Statement of Financial Performance of the Consolidated Fund for the year ended 31 December 2014.
ii) Statement of Financial Position of the Consolidated Fund as at 31 December 2014.
(Show all workings clearly)

b) Disclose any TWO significant accounting policies as part of the notes to your accounts, as much as the information provided will permit.

i) Statement of Financial Performance of the Consolidated Fund
for the year ended 31 December, 2014

ii) Statement of Financial Position as at 31 December 2014

ii) Statement of Financial Position as at 31 December 2014

(b)
Notes on Accounting Policy include:
i) Basis of Accounting
The accounts are prepared on accrual basis for the first time.
ii) Consumption of Fixed Capital/depreciation policy
Depreciation is charged on non-financial assets acquired during the year.
Infrastructure is depreciated at 5% per annum on cost and other PPEs are
depreciated at 10% per annum on cost.
iii) Accounts are prepared in compliance with the IPSAS and the Financial
Laws of the country.

EXAMINER’S COMMENTS
This was generally fairly well answered by most candidates. Some candidates
however performed very poorly in answering the question, showing that they were
ill-prepared for the examination.

 

 

 

  • 2 Marks

PSAF – Nov 2016 – L2 – Q1b – International Public Sector Accounting Standard

Identify and disclose two significant accounting policies for the Consolidated Fund using the accrual basis for the first time.

Disclose any TWO significant accounting policies as part of the notes to your accounts, as much as the information provided will permit.

Notes on Accounting Policy include:

i) Basis of Accounting
The accounts are prepared on an accrual basis for the first time.

ii) Consumption of Fixed Capital/Depreciation Policy
Depreciation is charged on non-financial assets acquired during the year. Infrastructure is depreciated at 5% per annum on cost, and other PPEs (Property, Plant, and Equipment) are depreciated at 10% per annum on cost.

iii) Accounts are prepared in compliance with the IPSAS and the Financial Laws of the country.

  • 10 Marks

AAA – Nov 2020 – L3 – Q4b – Government External Audit and Public Accountability | Public Sector Audit

Explain the factors to consider when determining if financial statements are properly prepared under a compliance framework and differentiate between a fair presentation framework and a compliance framework.

You led a team of auditors from the Auditor-General’s Department to audit the Financial Statements of the Ministry of Defence. You have just completed the audit and are about to report your findings.

Required:
i) Explain the factors you will take into account to determine that the financial statements have been properly prepared in accordance with a compliance framework. (6 marks)

ii) Explain the difference between a fair presentation framework and a compliance framework. (4 marks)

  • Factors for Determining Proper Preparation under Compliance Framework:
    • Accounting Policies: Ensure that the accounting policies used by the entity are acceptable, reasonable, consistently applied, and adequately disclosed.
    • Compliance with IPSAS: Verify that the financial statements comply with International Public Sector Accounting Standards (IPSAS), as applicable to the entity.
    • Legal and Regulatory Compliance: Confirm that the financial statements comply with relevant laws and regulations, such as those governing public sector entities in Ghana.
    • Accuracy of Financial Information: Assess whether the financial statements provide an accurate and reliable representation of the entity’s financial position and operations within the bounds of the compliance framework.
    • Disclosure Requirements: Evaluate whether all necessary disclosures have been made in the financial statements as required by the compliance framework.
    • Approval by Relevant Authorities: Ensure that the financial statements have been appropriately approved and authorized by the relevant government authorities.
  • Difference between Fair Presentation Framework and Compliance Framework:
    • Fair Presentation Framework: Under this framework, financial statements are required to give a true and fair view of the entity’s financial position and performance. This often involves compliance with IPSAS or other relevant financial reporting standards, with a focus on providing users with an accurate and fair representation of the entity’s financial health. The framework allows for the use of professional judgment to achieve a fair presentation, even if this requires deviation from specific standards or regulations.
    • Compliance Framework: In contrast, a compliance framework emphasizes strict adherence to laws, regulations, and specific accounting standards without necessarily ensuring that the financial statements present a true and fair view. The primary concern under a compliance framework is that the financial statements meet all legal and regulatory requirements, even if this does not result in a true and fair representation of the entity’s financial position.
  • 10 Marks

PSAF – May 2021 – L2 – Q1b – International public sector accounting standards

Explain the objectives of measurement in financial reporting under IPSAS and describe four measurement bases for assets in line with the IPSAS Conceptual Framework.

Implementation of the International Public Sector Accounting Standards (IPSAS) is a priority of Government in 2021, and the Controller and Accountant General is doing everything possible to ensure effective implementation. One major concern of the implementors is the measurement of public assets, as these assets are numerous, varied, and acquired in different ways. Nevertheless, assets need to be measured and recognised in accordance with IPSAS.

Required:
i) Explain the objectives of Measurement in Financial Reporting under IPSAS. (4 marks)
ii) Explain FOUR (4) Measurement Bases for assets in line with the Conceptual Framework of General Purpose Financial Report. (6 marks)

i) Measurement Objectives:
The objective of measurement is to select those measurement bases that most fairly reflect the cost of services, operational capacity, and financial capacity of the entity in a manner that is useful in holding the entity to account and for decision-making purposes. The selection of a measurement basis for assets and liabilities contributes to meeting the objectives of financial reporting in the public sector by providing information that enables users to assess:

  • The cost of services provided in the period in historical or current terms;
  • Operational capacity—the capacity of the entity to support the provision of services in future periods through physical and other resources;
  • Financial capacity—the capacity of the entity to fund its activities.

ii) Bases of Measurement of Assets:

  1. Historical Cost:
    • The consideration given to acquire or develop an asset, which is the cash or cash equivalents or the value of the other consideration given at the time of its acquisition or development.
  2. Market Value:
    • The amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction.
  3. Replacement Cost:
    • The most economical cost required for the entity to replace the service potential of an asset at the reporting date.
  4. Net Selling Price:
    • The amount that the entity can obtain from the sale of the asset after deducting the costs of sale.
  5. Value in Use:
    • The present value to the entity of the asset’s remaining service potential or ability to generate economic benefits if it continues to be used and the net amount that the entity will receive from its disposal at the end of its useful life.
  • 20 Marks

PSAF – Nov 2020 – L2 – Q4 – Public Procurement | International public sector accounting standards

Explain principles of public procurement and risks associated with procurement in Ghana's public sector. Discuss service concession arrangements under IPSAS 32.

a) Using public money to procure goods, works, and services to provide public services is a frequent but complicated decision of the Head of Procurement entities. It is required that such decisions should go through due process to attain value for money for the public. The Public Procurement laws are embodiments of core principles that govern the entire process. Procurement entities are therefore entreated to promote and secure these core principles in the conduct of public procurements. Non-compliance with these principles embedded in the law increases the risk associated with public procurement.

Required:

i) Explain SIX (6) general principles of public procurement that an officer in charge of procurement of goods, services, and works should consider in line with the Public Procurement Act 2016 (Amendment) Act 914. (6 marks)

ii) Discuss FOUR (4) risks associated with public procurement in the Ghanaian Public Sector. (4 marks)

b) IPSAS 32: Service Concession Arrangements: Grantor establishes the accounting and reporting requirements for the grantor in a service concession arrangement. In these kinds of arrangements, the grantor is a public sector entity. Service Concession arrangements in the public sector are characterized by binding arrangements that involve private sector participation in the development, financing, operation, and/or maintenance of assets used to provide public services. IPSAS 32’s intention is to create symmetry with IFRIC 12: Service Concession Arrangements on relevant accounting issues (that is, liabilities, revenue, and expenses) from the grantor’s point of view.

Required:
i) State and Explain TWO (2) conditions under which a grantor can recognize a Service Concession Asset. (4 marks)

ii) Explain any THREE (3) pieces of information that the grantor shall present and disclose in its Financial Statements. (6 marks)

a) Principles of Public Procurement:

i) General Principles:

  1. Competition: Opening procurement opportunities to all potential suppliers and contractors encourages competition, ensuring value for money. Competitive tendering should be the preferred option.
  2. Accountability: The procurement entity and the head of procurement are accountable to the public for their procurement decisions and must provide explanations for their actions.
  3. Transparency: The procurement process should be transparent, from the invitation to tender to the evaluation and selection of suppliers. This transparency ensures public trust and fairness.
  4. Fairness/Non-Discrimination: All potential suppliers should be treated fairly, with no discrimination based on gender, party affiliation, ethnicity, or religion. Only price and quality should be the deciding factors.
  5. Economy: The procurement process should aim to reduce costs while achieving the desired outcomes, ensuring that public funds are used efficiently.
  6. Efficiency: The procurement process should be conducted efficiently to achieve the intended procurement objectives without unnecessary delays or costs.

(6 marks)

ii) Risks Associated with Public Procurement:

  1. Overvaluation of Procurement Contracts: There’s a high risk of contracts being overvalued for personal gain, leading to waste of public resources.
  2. Procurement of Inferior Goods and Services: There is a risk of public entities procuring substandard goods and services that do not meet the required specifications, often due to corruption or incompetence.
  3. Conflict of Interest: Heads of entities and procurement officers might award contracts to companies they have personal interests in, compromising the integrity of the procurement process.
  4. Fake Procurement: There is a risk of payments being made for goods and services that were never procured, with the proceeds being misappropriated.

(4 marks)

b) Service Concession Arrangements (IPSAS 32):

i) Conditions for Recognizing a Service Concession Asset:

  1. Control of Services: The grantor must control or regulate the services that the operator must provide with the asset, including who receives the services and the prices charged.
  2. Control of Residual Interest: The grantor must control any significant residual interest in the asset at the end of the service concession arrangement term, through ownership, beneficial entitlement, or otherwise.

(4 marks)

ii) Information to be Disclosed in Financial Statements:

  1. Description of the Arrangement: A comprehensive description of the service concession arrangement, including significant terms that may affect future cash flows, should be disclosed.
  2. Nature and Extent of Rights and Obligations: This includes the rights to use specified assets, receive specified services, or receive specified assets at the end of the arrangement, as well as any obligations to provide the operator with access to assets or revenue-generating opportunities.
  3. Changes in the Arrangement: Any changes in the service concession arrangement during the reporting period should be disclosed, including the impact on the financial position and performance of the grantor.
  • 20 Marks

PSAF – Nov 2020 – L2 – Q2 – Preparation and presentation of financial statements for local government

Prepare financial statements (Statement of Financial Performance and Statement of Cash Flow) and explain basic disclosure requirements for Eminaa District Assembly.

a) The following details relate to Eminaa District Assembly for the year 2018.

Details GH¢’000
Dividend Received 93,250
Central Government Salaries 12,000,000
Basic Rates 370,900
Districts Development Facility 15,000,600
Rent from Land and Building 6,120,800
Established Posts 1,140,700
Other Expenditure 600,000
Non-Established Posts 580,000
Allowances 390,470
Court Fees 240,000
Inventory and Consumables 800,000
Sanitation Fees 370,000
General Cleaning 350,000
Common Fund 2,930,000
Social Benefit 840,300
Equity Investment Acquired 420,000
Infrastructure, Plant, and Equipment 980,000
Work-In-Progress 490,000
Loans Received 2,330,000
Interest Expense 200,000
Advances to Staff 660,000
Royalties 430,000
Consultancies cost 470,000
Training and Workshop cost 275,000
Transport and Travelling cost 620,000
Consumption of Fixed Assets 960,000
Special Services 820,000
Utilities 630,000
Market Tolls 870,000
Permit Fees 990,000
Fines and Penalties 330,000
Development Bonds Issued 1,300,000
Hostel License 630,920
Business Income 2,300,600
Chop Bar License 300,400
Proceeds from Sale of Equity 990,320
Accumulated Fund (1/1/2018) 370,600
Herbalist License 530,370
Cash and Cash Equivalent @ (1/1/2018) 12,300,240
Stool Land Revenue 600,000
Lorry Park Fees 720,400
Market Store Rent 300,750
Recoveries 194,000
Loan Repayment 143,000
Property Rate 820,900

Additional Information:

  1. Eminaa District Assembly adopts the accrual basis of accounting in the preparation of its financial statements.
  2. Established Post salaries outstanding as at 31/12/2018 were GH¢180,000,000.
  3. Inventory at 31/12/2018 was GH¢170,000,000.

Required:
Prepare for Eminaa District Assembly:

  • Statement of Financial Performance for the year ended 31/12/2018.

(7 marks)

b) Prepare a statement of cash flow for Eminaa District Assembly for the year ended 31/12/2018. (8 marks)

c) Subject to IPSAS 6: Consolidated and Separate Financial Statements, a Controlling Entity that presents Consolidated Financial Statements shall disclose certain basic information.

 

Explain FIVE (5) basic information that an institution preparing Consolidated Financial Statements needs to disclose. (5 marks)

a) Statement of Financial Performance:

EMINAA DISTRICT ASSEMBLY
STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 31ST DECEMBER 2018

Revenue GH¢’000
Decentralized Transfers 30,530,600
Internally Generated Funds (IGF) 14,888,920
Total Revenue 45,419,520
Expenditure GH¢’000
Compensation of Employees 2,291,170
Goods and Services 3,520,000
Consumption of Fixed Capital 960,000
Interest 200,000
Social Benefits 840,300
Other Expenditure 600,000
Total Expenditure 8,411,470

| Net Operating Result – Surplus | 37,008,050 |

Notes:

  1. Decentralized Transfers:
    • Government of Ghana Salaries: GH¢12,000,000
    • District Development Facility: GH¢15,000,600
    • Common Fund: GH¢2,930,000
    • Stool Land Revenue: GH¢600,000
    • Total: GH¢30,530,600
  2. Internally Generated Funds (IGF):
    • Basic Rates: GH¢370,900
    • Rent from Land and Building: GH¢6,120,800
    • Court Fees: GH¢240,000
    • Royalties: GH¢430,000
    • Market Tolls: GH¢870,000
    • Market Store Rent: GH¢300,750
    • Permit Fees: GH¢990,000
    • Fines and Penalties: GH¢330,000
    • Hostel License: GH¢630,920
    • Business Income: GH¢2,300,600
    • Chop Bar License: GH¢300,400
    • Dividend Received: GH¢93,250
    • Herbalist License: GH¢530,370
    • Property Rate: GH¢820,900
    • Sanitation Fees: GH¢370,000
    • Lorry Park Fees: GH¢720,400
    • Total: GH¢14,888,920
  3. Compensation of Employees:
    • Established Posts: GH¢1,320,700 (including GH¢180,000 outstanding)
    • Non-Established Posts: GH¢580,000
    • Allowances: GH¢390,470
    • Total: GH¢2,291,170
  4. Goods and Services:
    • Inventory and Consumables: GH¢630,000 (GH¢800,000 – GH¢170,000)
    • General Cleaning: GH¢350,000
    • Consultancies Cost: GH¢470,000
    • Training and Workshop Cost: GH¢275,000
    • Transport and Travelling Cost: GH¢620,000
    • Special Services: GH¢820,000
    • Utilities: GH¢630,000
    • Total: GH¢3,520,000

b) Statement of Cash Flow:

ELMINA DISTRICT ASSEMBLY
STATEMENT OF CASH FLOW FOR THE YEAR ENDED DECEMBER 31, 2018

Description Amount (GH¢’000) Amount (GH¢’000)
Cash Flow from Operating Activities
Inflows
Decentralised transfer 30,530,600
Internally generated fund 14,888,920
Total Inflows 45,419,520
Outflows
Compensation of employees 2,111,170
Goods and services 3,690,000
Interest 200,000
Social Benefits 840,300
Other expenditure 600,000
Total Outflows 7,441,470
Net cash flow from operating activities 37,978,050
Net Cash Flow from Investing Activities
Equity investment acquired (420,000)
Infrastructure, plant and equipment (980,000)
Work-in-progress (490,000)
Advanced to staff (660,000)
Sale of equity 990,320
Recoveries 194,000
Net Cash Flow from Investing Activities (1,365,680)
Cash Flow from Financing Activities
Development bonds issued 1,300,000
Loans received 2,330,000
Loan repayment (143,000)
Net Cash Flow from Financing Activities 3,487,000
Net increase in Cash and Cash equivalent 40,099,370
Cash and cash equivalent (1/1/2018) 12,300,240
Cash and cash equivalent (31/12/2018) 52,399,610

c) Basic Disclosures in Consolidated Financial Statements:

The following disclosures shall be made in consolidated financial statements:

  1. A list of significant controlled entities: This includes a summary of entities over which control is exercised.
  2. The fact that a controlled entity is not consolidated: As required by IPSAS 6, reasons for not consolidating a controlled entity should be disclosed.
  3. Summarized financial information of controlled entities not consolidated: This includes details such as total assets, liabilities, revenues, and surplus or deficit for unconsolidated entities.
  4. The name and explanation for control: Any controlled entity where the controlling entity holds 50% or less ownership interest should be disclosed with reasons for control.
  5. Significant restrictions on the ability of controlled entities: Any limitations on transferring funds to the controlling entity in the form of cash dividends or similar distributions should be disclosed.
  • 5 Marks

PSAF – Nov 2020 – L2 – Q1b – General purpose financial reporting framework

This question explains the difference between general-purpose and special-purpose financial reports.

In line with the Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities issued by the International Public Sector Accounting Standards Board (IPSASB), explain the difference, if any, between a General-Purpose Financial Report and a Special-Purpose Financial Report.

 

  • General-Purpose Financial Report (GPFR): These are financial reports prepared to meet the needs of users who do not have the authority to require reports tailored to their specific information needs. GPFRs must comply with IPSAS.
  • Special-Purpose Financial Report (SPFR): These are financial reports prepared to meet the specific needs of users who have the authority to require tailored reports. SPFRs do not need to comply with IPSAS but must satisfy the requirements of the users.
  • 4 Marks

PSAF – May 2017 – L2 – Q3b – General purpose financial reporting framework

This question identifies characteristics of Government Business Enterprises (GBEs) as defined by IPSAS 1 for determining appropriate financial reporting standards.

Public sector entities are required to present financial reports in compliance with the International Public Sector Accounting Standards (IPSAS). However, Government Business Enterprises (GBEs) are to present the financial reports using IFRS due to their peculiar characteristics that separate them from other public sector entities.

In determining whether an entity is a GBE for financial report purposes, one must examine their nature and characteristic rather than the legal form. In the entity you work for, there is controversy among top management about whether to use IPSAS or IFRS.

Required: Identify FOUR characteristics of GBEs in accordance with IPSAS 1, Presentation of Financial Statements. (4 marks)

Characteristics of Government Business Enterprises (GBEs) according to IPSAS 1:

  • Power to Contract in its Own Name: GBEs have the legal capacity to enter into contracts independently.
  • Financial and Operational Authority: GBEs are granted financial and operational autonomy to conduct business activities.
  • Profit or Full Cost Recovery: GBEs sell goods and services with the objective of making a profit or recovering full costs.
  • Not Reliant on Government Funding: GBEs operate as going concerns without continuous government funding, except for arm’s length transactions.
  • 8 Marks

PSAF – May 2016 – L2 – Q4c – Public sector financing initiatives

This question explores the objectives and guiding principles of Public Private Partnership (PPP) agreements in Ghana.

i) State ONE objective of a public private partnership agreement?

ii) Explain THREE factors that the Government would consider before entering into a public private partnership agreement?

iii) Explain the following terms used as guiding principles in IPSAS 13 and 32 – Accounting for Public Private Partnership:

  • Service Concession Arrangement
  • Lease
  • Recognition of Revenue
  • Economic Life of an Asset

i) Objective of PPP Agreement: Leverage public assets and funds with private sector resources to accelerate investment in infrastructure and services.

ii) Factors considered before entering into a PPP include:

  • Value for Money: Ensuring the PPP gives greater value than the best realistic public sector alternative.
  • Risk Allocation: Optimizing risk transfer to the party best able to manage it.
  • Ability to Pay: Considering end-user affordability and government budgetary sustainability.

iii) Explanation of terms:

  • Service Concession Arrangement: A binding arrangement where the operator provides a public service on behalf of the grantor using the service concession asset.
  • Lease: An agreement where the lessor conveys the right to use an asset to the lessee in return for payment.
  • Recognition of Revenue: Revenue is recognized evenly over the term of the arrangement as a reduction of liability.
  • Economic Life of an Asset: The period over which an asset is expected to yield economic benefits or service potential.

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