Topic: Public sector fiscal planning and budgeting

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  • 20 Marks

PSAF – March 2024 – L2 – Q3 – PEFA Framework and Budget Performance Report

Discuss the benefits of the PEFA framework, sources of information for PEFA assessment, and the preparation and interpretation of a budget performance report.

a) The Public Financial Management Regulation, LI 2378 defines Public Financial Management (PFM) as laws, rules, systems, and processes used by the Government to mobilize revenue, allocate public funds, undertake public spending, account for funds, and audit results. In 2001, a group of development partners initiated the Public Expenditure and Financial Accountability (PEFA) framework to assess the status of public financial management at central and local government levels. Since then, Ghana has subjected itself to periodic assessments in an attempt to improve the country’s PFM system.

Required:
i) Discuss FOUR (4) benefits the use of the PEFA framework can bring to a country. (6 marks)
ii) Explain FOUR (4) sources of information for PEFA assessment. (4 marks)

 

b) Budget Performance Report is one of the major accountability provisions under the Public Financial Management laws. Regulation 215(2) of the Public Financial Management Regulation, 2019, LI 2378 provides that each Principal Account Holder shall not later than 31 March of the ensuing year submit an annual budget performance report to parliament. The following is an extract from the GIFMIS platform representing Government of Ghana funding for the Ministry of Sanitation for the year 2023.

Budget Item Annual Appropriation (GH¢’000) YTD Warrant (GH¢’000) YTD Payments (GH¢’000)
Compensation of Employees 25,500 18,280 17,450
Goods and Services 5,000 3,450 3,400
Capital Expenditure 8,780 1,220 550
Total 39,280 22,950 21,400

Required:
i) Explain the meaning of Annual Appropriation and YTD Warrant to the Principal Account Holder of the ministry. (2 marks)
ii) Enumerate TWO (2) issues that should be specified in the Annual Budget Performance Report to be submitted by the Principal Account Holder according to the Regulations 215 of LI 2378. (2 marks)
iii) Prepare a Statement of Budget Performance Report for the year 2023 showing the budget-warrant outturns and warrant utilization rates. (3 marks)
iv) Interpret the budget performance statement in (iii) above to facilitate the Minister’s upcoming meeting with the select committee of parliament as required under the law. (3 marks)

a)
i) Benefits of the PEFA framework to countries:

  1. Assessment of PFM Performance: The PEFA framework provides a standardized methodology for assessing the performance of a country’s public financial management system. By conducting PEFA assessments, countries can identify strengths and weaknesses in their PFM systems, enabling them to prioritize reforms and improve accountability and transparency.
  2. Basis for Reform Planning and Prioritization: PEFA assessments serve as a diagnostic tool for governments, helping them identify areas for improvement in their PFM systems. Based on the findings of the assessment, countries can develop action plans and prioritize reforms to address deficiencies and strengthen financial management practices.
  3. Monitoring and Evaluation of Reform Progress: The PEFA framework allows countries to monitor and evaluate the progress of PFM reforms over time. By conducting periodic PEFA assessments, governments can track improvements in PFM performance, measure the effectiveness of reform initiatives, and adjust strategies as needed to achieve desired outcomes.
  4. Enhanced Donor Coordination and Support: PEFA assessments provide a common language and set of benchmarks for donors, governments, and other stakeholders involved in supporting PFM reforms. By aligning donor assistance with the findings of PEFA assessments, countries can ensure that reform efforts are coordinated, targeted, and effectively implemented.
  5. Promotion of Transparency and Accountability: The PEFA framework promotes
    transparency and accountability in public financial management by providing a
    systematic approach for assessing the integrity, reliability, and timeliness of fiscal
    information. By enhancing the credibility of financial reporting, PEFA assessments
    contribute to greater trust and confidence in government institutions.
  6. Capacity Building and Institutional Strengthening: Through the process of
    conducting PEFA assessments and implementing reforms, countries can build the
    capacity of government institutions and officials involved in financial
    management. By strengthening institutional capacity, countries can improve their
    ability to manage public resources efficiently and effectively.
  7. International Benchmarking and Comparison: PEFA assessments allow
    countries to benchmark their PFM performance against international standards
    and best practices. By comparing performance indicators with peer countries,
    governments can identify areas of relative strength and weakness, learn from
    successful experiences and adopt innovative approaches to PFM reform.

ii) Sources of information for PEFA assessment:

  1. Legislation: Government financial management laws and regulations provide the legal framework for public financial management and are a primary source of information for PEFA assessments.
  2. Government Policy Papers: These documents outline government strategies, policies, and priorities, which can offer insights into the PFM environment.
  3. Budget Documents: The annual budget and related financial documents provide critical data on planned and actual revenue, expenditure, and financing activities.
  4. Reports and Statistics: Official reports and statistics, including those from national statistical agencies, provide quantitative data necessary for assessing PFM performance.
  5. Recent surveys.
  6. Analytical work at national, regional or international levels.
  7. Interview of key stakeholders.

b)
i) Meaning of Annual Appropriation and YTD Warrant:

  • Annual Appropriation: This refers to the total amount of money that has been authorized by Parliament to be spent by a covered entity during the fiscal year. It represents the maximum budgetary allocation permitted for expenditure.
  • YTD Warrant: Year-to-date (YTD) Warrant refers to the amount that has been approved by the Ministry of Finance for release from the Annual Appropriation. It is the actual amount made available to the entity for spending up to the reporting date.

(1 mark each = 2 marks)

ii) Issues to be specified in the Annual Budget Performance Report:

  1. Achievements of the Covered Entity: A summary of what has been accomplished in relation to the goals and objectives set for the fiscal year.
  2. Annual Work Plan: Details of the planned activities and projects for the year, along with any deviations or modifications.

(Any 2 points @ 1 mark each = 2 marks)

iii) Statement of Budget Performance Report for the year 2023:

Budget Item Annual Appropriation (GH¢’000) YTD Warrant (GH¢’000) YTD Payments (GH¢’000) Budget-Warrant Outturn (GH¢’000) Warrant Burn Rate (%)
Compensation of Employees 25,500 18,280 17,450 7,220 (28.31%) 95%
Goods and Services 5,000 3,450 3,400 1,550 (31.00%) 99%
Capital Expenditure 8,780 1,220 550 7,560 (86.10%) 45%
Total 39,280 22,950 21,400 16,330 (41.57%) 93.25%

(3 marks evenly spread using ticks)

iv) Interpretation of Budget Performance:

  • Budget-Warrant Outturn: The overall budget performance shows that 41.57% of the ministry’s budget was not released by the government. This would likely impact the ministry’s ability to fully implement its planned activities, especially in capital expenditures, which had the lowest release rate at only 13.9%. The non-release of a significant portion of the budget may have constrained the ministry’s service delivery and project execution.
  • Warrant Burn Rate: Despite the limited releases, the ministry managed to utilize 93.25% of the total warrants issued, with a near-complete utilization rate for Goods and Services at 99%. However, the Capital Expenditure category showed a significant underutilization, with only 45% of the released funds being spent. This suggests potential delays in project execution or issues with the procurement process.
  • 6 Marks

PSAF – Dec 2023 – L2 – Q5b – Public sector fiscal planning and budgeting

Explain expenditure in advance of appropriation, mid-year review, and commitment in the context of public financial management in Ghana.

Explain the following processes or practices in public financial management in Ghana:

i) Expenditure in advance of appropriation
ii) Mid-year review
iii) Commitment

i) Expenditure in Advance of Appropriation
Expenditure in advance of appropriation occurs when the budget cannot take effect at the beginning of the fiscal year. In such cases, the President of Ghana is required to seek approval from Parliament to allow government spending before the budget is formally approved. This practice ensures that essential government functions continue uninterrupted. The authority for expenditure in advance lapses either when the budget is approved or three months after the end of the year, whichever comes first.

(2 marks)

ii) Mid-Year Review
The mid-year review is a process mandated by the Public Financial Management Act, which requires the Minister of Finance to prepare and submit to Parliament a mid-year fiscal policy review not later than 31st July of each financial year. The review includes an overview of recent macroeconomic developments, updates to macroeconomic forecasts, an analysis of total revenue, expenditure, and financing performance for the first half of the year, and a presentation of a revised budget outlook for the remainder of the year. The review may also propose a supplementary budget if necessary.

(2 marks)

iii) Commitment
Commitment in public financial management refers to the practice of reserving funds in the budget to cover expenditure decisions made by management. This ensures that when a decision is made to spend, the necessary funds are already allocated and available, preventing overspending. Commitments typically take the form of purchase orders, contracts, or other obligations. Under the Public Financial Management Act, all expenditures should be preceded by a commitment to ensure adherence to the budget, and failure to do so is considered an offense.

(2 marks)

  • 10 Marks

PSAF – Dec 2023 – L2 – Q5a – Public sector fiscal planning and budgeting

Discuss ways Parliament can enhance public financial management in Ghana.

Parliament has a constitutional mandate to scrutinize government spending. This oversight function is vested in the legislature as a fundamental principle of the separation of powers. There is, however, the need to improve the capacity of Parliament, especially the committees given the authority to keep the executive in check and to spend within the budget.

Required:
Discuss FOUR (4) ways by which Parliament can enhance public financial management in Ghana, bearing in mind relevant legislations. (10 marks)

Ways Parliament Can Enhance Public Financial Management in Ghana:

  1. Enacting Effective Legislation: Parliament can enhance public financial management by ensuring that strong and effective laws are passed to govern the management of financial resources. Parliament has the power to scrutinize and debate financial laws dispassionately, ensuring they are robust and relevant. If laws are found to be weak or outdated, Parliament should act swiftly to amend or repeal them to ensure they remain effective.
  2. Ensuring Compliance with Existing Laws: Beyond passing laws, Parliament must ensure that existing financial legislation is strictly complied with by the executive and public sector managers. This can be achieved through rigorous oversight functions, regular inquiries, and the imposition of sanctions where there is non-compliance with the laws.
  3. Scrutinizing and Approving the National Budget: Parliament’s role in scrutinizing and approving the national budget and supplementary budgets is crucial. By conducting detailed examinations of the budget, ensuring that it aligns with national priorities, and rejecting politically motivated expenditures, Parliament can ensure that public resources are allocated effectively and in the public interest.
  4. Monitoring Budget Implementation: Parliament can enhance public financial management by closely monitoring the implementation of the budget throughout the fiscal year. This includes demanding timely mid-year review reports from the Minister of Finance as required by the Public Financial Management Act 2016, analyzing these reports critically, and taking corrective action where deviations from the approved budget are identified.
  5. Effective Examination of Public Accounts: Through the Public Accounts Committee (PAC), Parliament should ensure that the Auditor-General’s reports on the public accounts are thoroughly examined, and any cases of financial irregularities are investigated. PAC should ensure that recommendations are implemented promptly, holding public officers accountable for their financial management practices.
  6. Enforcing Sanctions for Financial Misconduct: Parliament should ensure that there is an effective sanctioning regime for corruption and other financial malpractices in the public sector. It should ensure that recommendations for sanctions from PAC or other oversight bodies are implemented without delay.
  7. Summoning Public Officers for Accountability: Parliament should regularly summon public officers to answer questions about their financial management practices, particularly where there are indications of mismanagement or misuse of public funds. This will enhance accountability and deter financial misconduct.
  • 20 Marks

PSAF – Nov 2018 – L2 – Q3a – Public sector fiscal planning and budgeting

Prepare a budget for 2019 using 2018 as a base and analyze the budgeting approach.

a) You are the head of the Budget department of the Ministry of Works. The Ministry intends to prepare the budget for the 2019 fiscal year and has intended to use the 2018 budget as a base. Below is the detail of the 2018 Budget:

Assumptions for 2019 Budget: i) The Ministry has introduced new equipment, leading to a 36% increase in IGF, but government grants will be cut by GH¢9,600,000. ii) Established post salary will increase by GH¢3,920,000, non-established post salaries will increase to GH¢4,960,000, and allowances will increase by 15%. iii) Utility cost will decrease to GH¢9,700,000; repairs cost will increase by 9%; and training and seminar cost will increase to GH¢17,820,000. iv) The Ministry expects to acquire new equipment, increasing the equipment cost by GH¢150,000,000.

Required: Using the 2018 Budget as a base and assumptions made, prepare the Budget for the 2019 fiscal year. (10 marks)

b)
i) Identify and explain the type of Budget approach used by the Ministry in the Budget preparation. (2 marks)

ii) Explain THREE (3) merits and THREE (3) demerits of the Budget approach adopted in the preparation of the 2019 Budget. (3 marks)

iii) Explain an alternative approach you would have suggested to the Ministry for their subsequent budget preparation and explain THREE (3) reasons why that approach is appropriate under the circumstance. (5 marks)

a) Budget for 2019

b) i) The Ministry used the Incremental Budgeting approach in the preparation of the 2019 Budget. This approach involves using the previous year’s budget as a base and making adjustments for expected increases or decreases in revenues and expenditures.

(2 marks)

ii) Merits of Incremental Budgeting:

  • Simplicity and Time-Efficiency: This method is straightforward and quick to apply, saving time in the budgeting process.
  • Stability: It provides stability as it builds on existing budgets, which are familiar to all stakeholders.
  • Ease of Justification: There is less need to justify the entire budget, as only the increments or decreases are usually scrutinized.

Demerits of Incremental Budgeting:

  • Inefficiencies are Carried Forward: Inefficiencies in the previous budget may be perpetuated if they are not critically examined.
  • Lack of Innovation: The approach discourages a fresh evaluation of activities and can stifle innovation as it assumes past activities are still relevant.
  • Resource Allocation Issues: The approach may not align resources with strategic priorities, leading to the potential misallocation of funds.

(3 marks total – 1.5 marks for three merits and 1.5 marks for three demerits)

iii) An alternative approach that could be suggested is Zero-Based Budgeting (ZBB).

Reasons for ZBB:

  • Resource Optimization: ZBB ensures that every department starts from a “zero base,” justifying all expenditures, leading to better resource optimization.
  • Eliminates Waste: This approach forces a review of all expenditures, helping to eliminate unnecessary spending and promoting efficiency.
  • Alignment with Strategic Goals: ZBB aligns budgeting with current strategic goals, ensuring resources are allocated to the most critical areas of need.
  • 10 Marks

PSAF – Dec 2023 – L2 – Q1a – Public sector fiscal planning and budgeting

Discuss five areas a draft accrual-based accounting policy should cover, indicating the importance of each area.

You are the Assistant Accountant of a fast-growing public university, which is moving from cash basis to accrual basis of accounting. You have been put in charge of developing a draft accrual-based accounting policy for the university.

Required: Discuss FIVE (5) areas that your draft accounting policy will cover, indicating why these areas are important. (10 marks)

Areas to be covered by accounting policies include:

  • Basis of accounting: The entity needs a clear policy on the basis of accounting it intends to adopt for the preparation of its financial statement. This policy guides the recognition and measurement of assets, liabilities, revenues, and expenses in the books of accounts.
  • Revenue recognition and measurement: Specific policy is required for the recognition and measurement of each type of revenue to the entity.
  • Inventory valuation: The accounting policies adopted in measuring inventories, including the cost formula used.
  • Depreciation of property, plant, and equipment: The policy should detail out the depreciation methods used and the useful lives or depreciation rates to be applied.
  • Measurement of PPEs: The measurement bases to be used for determining the gross carrying amount.
  • Foreign currency transactions: Policies on how foreign currency transactions and foreign operations in the financial statements of an entity and how to translate financial statements into a presentation currency. The principal issues are which exchange rate(s) to use and how to report the effects of changes in exchange rates in the financial statements.
  • Provisions/allowance for uncollectible revenues: Policies on how to make general and special allowances on revenue receivables and other receivables.
  • 5 Marks

PSAF – Nov 2021 – L2 – Q5b – Public sector fiscal planning and budgeting

Explain the specific responsibilities of the Controller and Accountant General towards covered entities under the Public Financial Management Act 2016 (Act 921).

The Controller and Accountant General is a key public officer responsible for ensuring the custody, safety, and integrity of public funds. In addition, the Controller and Accountant General has a responsibility towards covered entities to ensure effective public financial management across the public sector.

Required:
Explain FIVE (5) specific responsibilities of the Controller and Accountant General towards the covered entities under the Public Financial Management Act 2016 (Act 921).

  • Ensuring the Proper Custody of Public Funds:
    • The Controller and Accountant General is responsible for ensuring that all public funds, including those of covered entities, are safely and securely held in accordance with the law. This involves maintaining control over the opening and operation of government accounts.
  • Supervising the Compilation of Accounts:
    • The Controller and Accountant General must oversee the compilation of accounts from all covered entities. This includes ensuring that all financial transactions are accurately recorded and reported in line with statutory requirements.
  • Managing the Consolidated Fund:
    • One of the key responsibilities is to manage the Consolidated Fund, ensuring that all revenues collected by covered entities are properly accounted for and that all disbursements from the Fund are lawful and correctly documented.
  • Supporting Budget Execution:
    • The Controller and Accountant General plays a vital role in supporting budget execution by ensuring that funds are released to covered entities in accordance with approved budgets, and by monitoring expenditure to prevent overspending.
  • Providing Financial Reports:
    • It is the responsibility of the Controller and Accountant General to prepare and submit financial reports to the Minister of Finance and other relevant authorities. These reports must be comprehensive, accurate, and submitted on time to support decision-making and accountability in public financial management.
  • 4 Marks

PSAF – Nov 2018 – L2 – Q1b -Public sector fiscal planning and budgeting

Explain four objectives of financial reporting in public financial management.

Public sector entities have downplayed the role of quality financial reporting in public financial management. In recent times, the government has been encouraged by its developing partners to ensure effective financial management and reporting in the public sector by investing in people and processes. The developing partners have touted financial reporting as a major solution to public financial management requirements of developing countries.

Required:
Explain FOUR (4) objectives of financial reporting in public financial management.

Objectives of financial reporting in public financial management include:

  • To provide financial information useful for determining and predicting the flows, balance, and requirements of short-term financial resources of government.
  • To provide financial information useful for determining and predicting the economic condition of the government unit and changes therein.
  • To provide financial information useful for monitoring performance under terms of legal, contractual, and fiduciary requirements.
  • To provide information useful for evaluating managerial and organizational performances.
  • To determine the costs of programs, functions, and activities in a manner that facilitates analysis and valid comparison with established criteria among time periods and with other sector ministries.
  • 3 Marks

PSAF – May 2019 – L2 – Q3c – Public sector fiscal planning and budgeting

Explain the importance of budget guidelines in public sector accounting and finance.

According to Section 20 of the Public Financial Management Act, 2016 (Act 921), the Minister of Finance shall, subject to the approval of the cabinet, issue guidelines for the preparation of the budget for each financial year and circulate copies of the guidelines to each Covered Entity not later than 30 June each year. Budget Guidelines play an important role in budget development.

Required:
State and explain THREE (3) importance of Budget Guidelines in Public Sector Accounting and Finance.
(3 marks)

The importance of Budget Guidelines in Public Sector Accounting and Finance includes the following:

  1. Control of Aggregate Expenditure:
    • Budget guidelines help ensure that total government expenditure remains within affordable limits, consistent with macroeconomic constraints. This control is essential to prevent budget deficits and maintain fiscal discipline.
  2. Resource Allocation to Reflect Priorities:
    • Budget guidelines are crucial for ensuring that resources are allocated in a manner that aligns with the government’s policy priorities. They provide a framework for prioritizing spending in areas that will achieve the most significant impact on economic and social outcomes.
  3. Efficient Delivery of Public Services:
    • By providing clear instructions on budget preparation, budget guidelines help promote productive efficiency in the delivery of public services. This ensures that resources are used effectively to achieve the desired outcomes within the constraints of the available budget.
  4. minimization of the financial costs of budgetary management (i.e., efficient budget
    execution and cash and debt management practices).
  • 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)

i) Primary Fiscal Policy Objective and Guiding Principles

  • Primary Fiscal Policy Objective:
    The primary fiscal policy objective of the government is to ensure macroeconomic stability within the macroeconomic and fiscal framework of the country. This involves maintaining a balance between revenue mobilization and expenditure, controlling public debt, and achieving sustainable economic growth.
  • Guiding Principles:
  1. Sufficient Revenue Mobilization: Ensuring that enough revenue is mobilized to finance government programs and projects without excessive borrowing.
  2. Maintenance of Prudent and Sustainable Levels of Public Debt: Managing public debt in a way that does not jeopardize fiscal stability and economic growth.
  3. Efficiency, Effectiveness, and Value for Money in Expenditure: Ensuring that government expenditures are managed in a way that maximizes output and achieves the best outcomes with the resources available.
  4. ensuring that the fiscal balance is maintained at a sustainable level over the
    medium term.

ii) Post-Budget Management and Control Activities

  1. Mid-Year Review:
    A mid-year review is conducted to assess the performance of the budget in the first half of the fiscal year. This review helps identify any deviations from the planned budget and allows for adjustments to be made to ensure the budget remains on track.
  2. Budget Performance Report:
    Regular budget performance reports are prepared to track the progress of budget implementation. These reports provide insights into how well the budget is being executed and highlight areas that may require corrective actions.
  3. Supplementary Budget:
    In cases where the initial budget is insufficient to cover all government activities or unforeseen circumstances arise, a supplementary budget may be introduced to allocate additional resources.
  4. Virement and Reallocation of Funds:
    Virement involves the reallocation of funds within the budget to different expenditure items based on changing priorities or unforeseen needs. This ensures that funds are utilized efficiently and in line with government priorities.
  5. Cash Forecasting:
    Regular cash forecasting is conducted to ensure that sufficient cash is available to meet the government’s obligations. This involves predicting cash inflows and outflows to avoid liquidity issues.
  • 10 Marks

PSAF – May 2019 – L2 – Q3a – Public sector fiscal planning and budgeting

Prepare a flexible budget for 50% activity level and a variance analysis for the Ministry of Works and Housing.

a) The Ministry of Works and Housing prepares its budget using activity volume as a base for control purposes. The Ministry’s normal level of activity is 70%. However, in 2018, the Ministry had a peculiar challenge to the extent that they operated at a 50% level of activity. Below is the budget for 2018.

Level of activity 60% 70% 80%
Income: GH¢ GH¢ GH¢
IGF 337,500 345,300 353,100
Expenses:
Compensation of Employees 175,200 204,400 233,600
Goods and services 57,000 64,500 72,000
Interest 63,500 73,100 82,700
Assets 31,500 36,700 41,900
Other Expenditure 190,000 190,000 190,000
Surplus/Deficit (179,700) (223,400) (267,100)

Actual Results for 2018:

Description GH¢
IGF 350,920
Compensation of Employees 129,500
Goods and Services 73,400
Interest 92,000
Assets 31,100
Other Expenditure 172,300

Required:
i) Prepare a flexible budget for 50% level of activity.
(7 marks)

ii) Prepare a Variance Analysis Statement for the operational year 2018.
(3 marks)

i) Flexible Budget for 50% Level of Activity

Description 50% Level of Activity (GH¢)
Income:
IGF (50/70) × 345,300 = 246,643
Expenses:
Compensation of Employees (50/70) × 204,400 = 146,000
Goods and Services (50/70) × 64,500 = 46,071
Interest (50/70) × 73,100 = 52,214
Assets 36,700
Other Expenditure 190,000
Surplus/Deficit (218,342)

ii) Variance Analysis for 2018

Budget Item Flexible Budget (50%) (GH¢) Actual (GH¢) Variance (GH¢)
IGF 246,643 350,920 104,277
Compensation of Employees 146,000 129,500 16,500
Goods and Services 46,071 73,400 (27,329)
Interest 52,214 92,000 (39,786)
Assets 36,700 31,100 5,600
Other Expenditure 190,000 172,300 17,700
Total (218,342) (147,380) 43,962

The variance analysis shows the differences between the flexible budget prepared for a 50% level of activity and the actual results for 2018. The total variance indicates a favorable variance of GH¢43,962.

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