Question Tag: Revenue and Expenditure

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  • 20 Marks

PSAF – Nov 2017 – L2 – Q4 – Preparation and Presentation of Financial Statements for Local Government

Prepare a Revenue and Expenditure Statement and a Statement of Financial Position for a Local Government Authority based on the provided financial data.

a) Below are extracts from the books of a Local Government Authority for the period ended 31 December 2015.

GH¢
Rates 27,115.16
Non-Governmental Agencies 1,000.00
Grants – District Development Facility 888,828.37
Lands and Royalties 113,563.50
Rents of Lands, Buildings 14,855.20
Licences 55,394.22
Fees 139,784.70
Fines, Penalties and Forfeits 14,231.00
Miscellaneous and Unidentified Revenue 27,345.50
Established Posts –
Non-Established Posts 41,503.62
Other Allowances 40,231.05
Casual labour 7,576.45
Materials /Office Supplies 34,628.40
Utilities 5,286.20
General Cleaning 358.50
Rentals 6,260.07
Transport 90,724.05
Repairs and Maintenance 10,568.40
Training, Seminars, Conferences 46,013.70
Consulting Services 1,500.00
Special Services 37,904.00
Other Charges / Fees 1,735.40
Grants – DACF 459,992.60
Constituency’s Share of the Common Fund 39,000.00
GOG – Grant 206,845.97
Donors 595,086.20
Other expenses 11,163.44

Below The Line Accounts

GH¢
Cash and Bank 200,740.71
Receivables 29,100.97
Equity Investment –
Infrastructure, Plants and Equipment 322,929.71
Work-in-progress 125,064.79
Accounts Payables 5,000.00
Deposits and Other Trust Monies 25,000.00
Accumulated Fund 1,002,096.58

Required: Prepare a Revenue and Expenditure Statement for the year ended 31 December 2015 and a Statement of Financial Position as at that date. (Show workings) (20 marks)

Revenue and Expenditure Statement for the Period Ended 31 December 2015

Revenue Note GH¢
Rates 27,115.16
Donors, Grants and Relief –
Non-Governmental Agencies 1,000.00
Grants – Districts 888,828.37
Interest –
Lands and Royalties 113,563.50
Rents of land, buildings 14,855.20
Licenses 55,394.22
Fees 139,784.70
Fines, Penalties and Forfeits 14,231.00
Miscellaneous unidentifiable revenue 27,345.50
Total Revenue 1,282,117.65
Expenditure
Compensation of Employees (1) 89,311.12
Goods and services (2) 234,978.72
Consumption of fixed capital –
Interest –
Grants*** (3) 1,300,924.97
Other expenses 11,163.44
Total Expenditure 1,636,378.25
Surplus / deficit for the period (354,260.40)
Accumulated surplus as at 31/12/13 1,002,096.58
Accumulated surplus as at 31/1/14 647,836.18

STATEMENT OF FINANCIAL POSITION AS AT 31ST DECEMBER, 2015

Assets GH¢ GH¢
Current Assets
Cash Balances 200,740.71
Receivables 29,100.97
Prepayments –
Total Current Assets 229,841.68

| Non-Current Assets | | | | Equity Investment | | – | | Infrastructure, Plant & Equipment | | 322,929.71 | | Work-in-progress | | 125,064.79 | | Total Non-Current Assets | | 447,994.50 | | Total Assets | | 677,836.18 |

LIABILITIES GH¢ GH¢
Current Liabilities
Accounts Payables 5,000.00
Deposits & Other Trust Monies 25,000.00
Short-term Borrowings –
Total Current Liabilities 30,000.00

| Non-Current Liabilities | | – | | Total Liabilities | | 30,000.00 |

| NET ASSETS | | 647,836.18 |

Workings

  1. Compensation of Employees
Compensation of Employees GH¢
Non-Established Post 41,503.62
Other Allowances 40,231.05
National Insurance Contribution 7,576.45
Total 89,311.12
  1. Goods & Services
Goods & Services GH¢
Materials / office supplies 34,628.40
Utilities 5,286.20
General Cleaning 358.50
Rentals 6,260.07
Transport 90,724.05
Repairs & Maintenance 10,568.40
Training, Seminars, Conference 46,013.70
Consulting Services 1,500.00
Special Services 37,907.00
Other Charges/Fees 1,735.40
Total 234,978.72
  1. Grants**
Grants**** GH¢
Grant – DACF 459,992.60
MP’s Common Fund 39,000.00
GOG Grant 206,845.97
Donors 595,086.20
Total 1,300,924.97

*** An alternative treatment is to treat grant*** as revenue to the Assembly since the question was not clear on whether the grant is expenditure or revenue.

(20 marks evenly spread using ticks)

  • 10 Marks

PSAF – April 2022 – L2 – Q3b – Public sector fiscal planning and budgeting

Prepare a budget performance report and analyze the budget outturn for Nkong District Assembly.

Below is the Revenue and Expenditure Extract of Nkong District Assembly for the year ended 31 December, 2020.

Description Annual Budget (GH¢’ 000) Revised Budget (GH¢’ 000) Actual Performance (GH¢’ 000)
Decentralised Transfer 32,000 35,000 42,000
Internally Generated Fund 56,000 45,000 33,000
Compensation 23,000 20,000 25,700
Goods and Services 13,000 18,000 24,000
Non-Financial Asset 18,000 15,000 12,000

Required:
i) Prepare a Budget Performance Report of Nkong District Assembly based on the extract above. (5 marks)

ii) Write a report analyzing the Budget Outturn while assessing the likely causes of the variances during the year. (5 marks)

Answer:
i) Budget Performance Report of Nkong District Assembly

Description Revised Budget (GH¢’ 000) Actual Performance (GH¢’ 000) Variance (GH¢’ 000) Variance (%)
Decentralised Transfer 35,000 42,000 7,000 20.00%
Internally Generated Fund 45,000 33,000 (12,000) (26.67%)
Compensation 20,000 25,700 (5,700) (28.50%)
Goods and Services 18,000 24,000 (6,000) (33.33%)
Non-Financial Asset 15,000 12,000 3,000 20.00%

ii) Report on Budget Outturn Analysis
From: Budget Officer
To: District Chief Executive, Nkong District Assembly
Date: [Insert Date]
Subject: Analysis of Nkong District Assembly Budget Performance for the Year Ended 31 December 2020

Introduction:
This report provides an analysis of the budget performance of Nkong District Assembly for the year ended 31 December 2020. The analysis is based on the variance between the revised budget and actual performance for key revenue and expenditure items.

Revenue Performance:

  • Decentralised Transfer: The actual revenue from decentralised transfers exceeded the revised budget by GH¢7,000,000, representing a positive variance of 20%. This positive outturn could be attributed to higher-than-expected transfers from central government, possibly as a result of additional allocations or improved compliance with transfer schedules.
  • Internally Generated Fund (IGF): The IGF fell short of the revised budget by GH¢12,000,000, resulting in a negative variance of 26.67%. This significant underperformance could be due to factors such as the economic impact of COVID-19 on local businesses, poor enforcement of revenue collection, or inefficiencies in the IGF mobilization process.

Expenditure Performance:

  • Compensation: Expenditure on compensation exceeded the revised budget by GH¢5,700,000, translating to a negative variance of 28.50%. This over-expenditure may be linked to unanticipated wage adjustments, higher staff recruitment, or payment of arrears.
  • Goods and Services: There was an overspend of GH¢6,000,000 on goods and services, leading to a negative variance of 33.33%. The overspend might be a result of increased operational demands or inflationary pressures that were not anticipated during the budget preparation.
  • Non-Financial Assets: The actual expenditure on non-financial assets was GH¢3,000,000 less than the revised budget, showing a positive variance of 20%. This underspend could indicate delays in the implementation of capital projects or procurement issues.

Conclusion:
Overall, the budget performance of Nkong District Assembly shows mixed results, with significant variances in both revenue and expenditure. While the revenue from decentralised transfers exceeded expectations, the shortfall in IGF and the overspend on compensation and goods and services are areas of concern that need addressing in future budget cycles. It is recommended that the assembly strengthens its IGF mobilization strategies and enforces stricter controls on expenditure to avoid budget overruns.

Recommendations:

  • Enhance IGF Mobilization: Implement more effective strategies for revenue collection to improve the performance of IGF.
  • Expenditure Control: Strengthen internal controls to manage expenditures, particularly in compensation and goods and services.
  • Capital Project Management: Improve planning and execution of capital projects to ensure timely utilization of allocated funds.

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