APRIL 2022 PROFESSIONAL EXAMINATIONS

PUBLIC SECTOR ACCOUNTING & FINANCE (PAPER 2.5)

CHIEF EXAMINER’S REPORT, QUESTIONS AND MARKING SCHEME

GENERAL COMMENTS
The standard of the question paper administered was very good. The question paper
was clear, practical, unambiguous and extensive coverage. However, the performance
of the candidates was not reflective of the quality of the questions administered. The
general performance was below the previous performances. In all, only 18% of the
candidates who sat for the paper passed, as against 34% pass rate in the November
2021 examinations. Prospective candidates are encouraged to give the necessary
attention to the paper and prepare for it accordingly.

STANDARD OF THE PAPER

The question paper is made up of five questions, eleven sub-questions and seventeen
sub-sub questions. In all, twenty-four test items were put to the candidates. The test
items were largely testing understanding (20%), application (65%), analysis (10%) and
evaluation (5%) in relation to the Bloom’s Taxonomy (Armstrong, 2016). This is
consistent with the learning outcomes set out in the examination syllabus. The
standard of the paper is comparable to the previous years. Nevertheless, exam setters
are encouraged to explore innovations in making the questions more practical and
interactive.

PERFORMANCE OF CANDIDATES
Despite the impressive quality and standard of the paper, candidates performed
poorly. The performance fell below the previous years’ 34%, 23% and 20% in
November 2021, May 2021, and November 2020 diets respectively.

NOTABLE STRENGTHS & WEAKNESSES OF CANDIDATES

Generally, the candidates demonstrated strengths in certain aspects of the subject, as
reflected in the responses produced to the questions in those areas. Some of these
areas of strength are:
 Preparation of financial statement. Question 2 required candidates to prepare
financial statements of a transport service agency of government in accordance with
the International Public sector Accounting Standards (IPSAS). Most candidates scored
above-average marks in this question, indicating their familiarity with financial
reporting in the public sector.
 Appreciation of accrual policy of accounting. Most candidates demonstrated in depth
understanding of the full accrual accounting system in the public sector.
 Budget performance reporting. Question 3b tested candidates on how to prepare
budget performance report and the question was well answered by most candidates,
except that some failed to analyse the budget outturns in the corresponding reports.

In spite of the above strengths, candidates were challenged in several other areas
which could be attributed to poor preparation for the examinations. The areas of
weakness include:

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 Application of theories or principles. Candidates were poor in applying principles
they have learnt to real-life situations. For example, Question (1b) required the
candidates to apply the qualitative characteristics of financial report to a given
financial statements, and some candidates failed to do so but rather focused on
explaining the characteristics without linking them to the financial statement.
 Inability to account for Public Private Partnership arrangements under IPSAS 32-
Service Concession Arrangement: Grantor. Most candidates demonstrated a lack of
knowledge in the subject matter. However, few candidates did well.
 Expression of understanding. Some candidates were unable to express themselves
well and therefore failed to put forward a convincing argument.
 Public Expenditure and Financial Accountability (PEFA). Many candidates were weak
in this area as shown by the responses to Question (3a-ii &iii). Some candidates seem
to have no idea of the PEFA framework.

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QUESTION ONE

a) Accrual basis of Accounting has been recommended as the best approach to ensure
accountability and transparency in the management of public funds. Despite its favourable
advantages, many countries are yet to implement a full accrual public sector accounting
system.

Required:
Discuss FOUR (4) reasons why many countries have not been able to implement a full
accrual public sector accounting system. (10 marks)

b) The Financial Statements below were submitted on 15 February 2021, to the Finance and
Administration Committee of Makambi District Assembly for consideration. Some
members of the committee condemned the quality of the financial statements on two
grounds:
 That, it is unacceptable to disclose the budget amounts in the financial statement for
external publication.
 That, the financial statements lack quality and therefore should be rejected outright by the
Committee.

Makambi District Assembly

Statement of Financial Performance for the year ended 31 December 2020
Actual Budget
Revenues GH¢'000 GH¢’000
Decentralised transfers 341,000 304,100
Internally Generated Fund 117,000 187,300
Donations and grants 34,000 25,000
492,000 516,400
Expenses
Compensation for employees 318,900 300,000
Use of goods and services 114,000 145,000
Consumption of fixed assets 12,000 -
Interest 9,000 9,400
Subsidies 500 800
Other expenses 8,600 6,600
463,000 461,800

Net operating result 29,000 54,600

Statement of Financial Position as at 31 December, 2020

GH¢'000
Non-Current Assets
Property, plant and equipment 1,200,000
Investment 300,000
1,500,000
Current Assets
Receivables 23,000
Loans 50,000
Cash and Bank 160,000
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 233,000
1,733,000
Liabilities and Funds
Loans 900,000
Payables 106,000
Accumulated fund 727,000
1,733,000
Required:
i) Discuss the merit or otherwise on the first ground of condemnation of the financial
statements presented to the Finance and Administration Committee. (2 marks)

ii) Using an appropriate framework of assessing the quality of a general-purpose financial

statement under the Conceptual Framework, assess the quality of the financial statements
presented to the Finance and Administration Committee to the extent that the information
available allows. (8 marks)

(Total: 20 marks)

QUESTION TWO

CitizenTransport Corporation (CTC) is a Public Transportation company in Ghana, which

seeks to provide reliable and affordable means of transport for commuters within villages,
towns, and cities as well as provide intercity movement and transport consultancy services.

The following financial information relates to CTC, as at 31 December, 2020.

DR CR
GH¢’000 GH¢’000
Vehicle Valuation Service 4,575,000
Establish Post 2,940,000
Allowance 856,670
Luggage Fees 655,600
Legal Cost 25,059
GoG Subvention 1,540,000
Consultancy Cost 588,500
Non- Establish Post 1,253,600
Seminars Cost 500,000
Parcel Services 906,600
Investment Income 8,600
Purchase of Spare Parts 10,250,000
Spare Parts Inventory (1/01/2020) 785,700
Receivables 371,550
Payables 182,840
Plant and Machinery 3,000,000 250,000
Motor Vehicle 14,755,000 852,000
Building 12,900,000 756,000
Software 995,500 150,000
Investment 1,345,000

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 Other Incomes 211,430
Cash and Bank 294,818
Training and Workshop Cost 104,000
Salaries and Emoluments 2,372,200
Other Expenses 71,000
Withholding Tax 90,500
Vehicle Insurance Premium 658,700
Workman Compensation Premium 889,800
Utilities Bills 560,053
Fees from Driving School 9,996,270
20% Loan 16,500,000
End of Service Benefits 298,000
Fuel and lubricant 1,550,780
Printing of tickets 399,160
Car Washing Cost 58,780
License Renewals for Drivers 78,870
Passenger Fare and Ticketing 20,022,630
Accumulated Fund 1,205,270
57,902,740 57,902,740

Additional information:
1) CTC uses accrual accounting basis in the preparation of its Financial Statements in line
with Public Financial Management Act,2016 (Act 921), Public Financial Management
Regulation 2019 L.I 2378 and the International Public Sector Accounting Standards
(IPSAS).
2) The loan in the trial balance represents funds advanced by Government from the
Consolidated Fund to CTC to procure fleet of buses in 2010. The repayment of the Loan
was scheduled to end in 2015. However due to liquidity challenges facing the corporation,
the Loan is still outstanding. On the basis of this, the Minister of Finance after assessing
the liquidity profile of CTC, made specific provision for Bad Debt on Loans Receivable by
waiving 50% of the loan outstanding. This was made in line with Section 53 of the Public
Financial Management Act 2016, (Act 921).
3) Provision is to be made for Interest on the remaining Loan.
4) Salaries and other emoluments outstanding during the year amounted to GH¢12,500,000
while that of use of goods and services other than workshop and seminars amounted
GH¢15,750,000
5) Inventories included in use of goods and services available at the end of the year were as
follows:
Spare Parts
GH¢’ 000
Historical Cost 900,000
Replacement Cost 802,000
Net Realisable Value 995,000

6) In 2019 CTC bought a Machinery amounting to GH¢30,000,000. This amount was wrongly
recognised in the 2019 Financial Statement as an expense instead of an Asset. However,
this Machine is still in use.
7) CTC uses straight line basis in depreciating their Capital Assets. Assets and their useful life
details are provided below:

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 Assets Useful Life
Plant and Machinery 15 years
Motor Vehicle 20 years
Building 30 years
Software 10 years
8) CTC plans to change its accounting policy in the recognition, measurement, presentation
or disclosure of inventory in the financial statements. This will be done in line with IPSAS
3: Accounting policies, Changes in Estimate and Errors.

Required:
In compliance with IPSAS and relevant legislations, prepare for CTC:
a) Statement of Financial Performance for the year ended 31 December 2020. (9 marks)
b) Statement of Financial Position as at 31 December 2020. (7 marks)
c) Explain TWO (2) Guiding Principles for formulating accounting policy. (2 marks)
d) Explain TWO (2) Condition that mandate a change in accounting policy. (2 marks)

(Total: 20 marks)

QUESTION THREE

a) The goal of the Minister for Finance is to build a robust, resilient, open and orderly Public
Financial Management (PFM) system for the country by the end of 2022. This ambitious
target has a huge budgetary implication for the government this time as a result of the
difficult fiscal position imposed by the COVID-19 pandemic. The Minister is however
optimistic that investing more in PFM systems today will produce the expected outcome in
the immediate future.

Required:
i) Discuss THREE (3) challenges of the current Public Financial Management systems of the
country. (3 marks)
ii) Explain THREE (3) expected outcomes of an open and orderly Public Financial
Management system of the country. (3 marks)
iii) Explain FOUR (4) ways by which the Public Expenditure and Financial Accountability
(PEFA) framework can help the Minister build an orderly and open Public Financial
Management system for the country. (4 marks)

b) Below is the Revenue and Expenditure Extract of Nkong District Assembly for the year
ended 31 December, 2020.
Annual Revised Actual
Budget Budget Performance
GH¢’ 000 GH¢’ 000 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:

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i) Prepare a Budget Performance Report of Nkong District Assembly based on the extract
above. (5 marks)
ii) Write a report analysing the Budget Outturn whiles assessing the likely causes of the
variances during the year. (5 marks)

(Total: 20 marks)

QUESTION FOUR

a) Banky Construction Ltd has tendered for several contracts that were advertised, but, in each
case, they fail to win these contracts. The company is now worried about their situation, as
it may lead to liquidation of the company. They have just contacted you for advice on how
to reverse this unfortunate downturn.

Required:
Explain FOUR (4) challenges that are likely to be the reason why they are failing to win
contracts. (4 marks)

b) Explain the following terms and practices as used in Public Procurement

i) Tender Security
ii) Least Cost Selection
iii) Tender Evaluation Panel
iv) Board of Survey (6 marks)

c) Discuss how each of the elements of Financial Statements listed below are recognized
and measured under IPSAS 32: Service Concession – Grantor;
i) Service concession asset
ii) Liability
iii) Revenue (10 marks)

(Total: 20 marks)

QUESTION FIVE

a) Budgeting is an essential element of Public Financial Management and it is a requirement

of the Constitution and other Public Financial Management enactments. Budgeting is a
process that requires the engagement and participation of citizens for accountability
purposes. The prime objective of budgeting is to set out the financial plans of government
for the ensuing year and how government plans and programmes will be financed.

Required:
i) Explain TWO (2) provisions in the 1992 Constitution relating to budgeting. (4 marks)
ii) Explain Citizen’s Budget and identify THREE (3) of its benefits in Public Financial
Management. (5 marks)
iii) Explain the role of budget guidelines in budgeting and identify FOUR (4) items of
information to be expected in a budget guideline. (6 marks)

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b) A Public Sector entity that applies IPSAS is currently faced with a particular financial
transaction for which no IPSAS exist for dealing with the issue. The management is
undecided on the choice of accounting policy to apply.

Required:
Discuss how the matter can be dealt with by management of the entity. (5 marks)

(Total: 20 marks)

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SOLUTION TO QUESTIONS

QUESTION ONE

a) Reasons why countries have not implemented a full accrual public sector
accounting system:
 Accruals accounting financial statements are more technical and relatively more
difficult to understand by users. Users require some technical knowledge to
understand such statements.
 A lot of subjective judgments can go into the determination of some estimates or
the making of provisions. Relevant accounts are therefore difficult to prepare and
can also be manipulated easily to suit the preparer’s desires.
 It requires significant investment in time and human capacity to produce accrual
basis financial statements.
 To the extent that budgets and other requirements are cash based; accrual basis
accounting fails to demonstrate compliance with budgetary estimates.
 Users of financial information such as legislators, tax payers, public sector officers
etc. may require a lot more technical guidance and support to appreciate the utility
of accrual based financial reports compared to financial statements based on other
basis of accounting.
 High cost of implementation discourages poor countries from implementation of
the accrual public sector accounting system.
 Lack or weak political commitment towards implementation of accrual public
sector accounting system. Political leadership often fails to prioritize the
implementation of accrual accounting.
(Any 4 points fully explained @ 2.5 marks each = 10 marks)

b)
i) Disclosure of budget information in the financial statement.
The first ground for disapproving the financial statements is that it discloses the
budget information in the financial statement which the committee finds
unacceptable. This ground of rejection is weak and unfunded as the International
Public Sector Accounting Standards 24 provides for presentation of budget
information in the general-purpose financial reports. IPSAS 24 requires a
comparison of budget amounts and the actual amounts arising from execution of
the budget to be included in the financial statements of entities which are required
to, or elect to, make publicly available their approved budget(s) and for which they
are, therefore, held publicly accountable. The standard also requires disclosure of
an explanation of the reasons for material differences between the budget and
actual amounts. Compliance with the requirements of this standard will ensure
that public sector entities discharge their accountability obligations and enhance
the transparency of their financial statements by demonstrating compliance with
the approved budget(s) for which they are held publicly accountable and, where
the budget(s) and the financial statements are prepared on the same basis, their
financial performance in achieving the budgeted results. Therefore, the position of

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 the Finance and Administration Sub-Committee is not in tandem with the
requirements of the Standards.
(1 mark for explaining the position of IPSAS 24; 1 mark for relating it to the
IPSAS 24’s position = 2 marks)

ii) Evaluating the quality of the financial statement

The Conceptual framework of general-purpose financial reporting provides for the
assessment of the quality of financial statement using the qualitative characteristics
(QCs) of the financial statement, which include relevance, faithful representation,
timeliness, understandability, comparability and verifiability. Therefore, the
appropriate framework for assessment is QCs Framework:
 Relevance: Financial and non-financial information is relevant if it is capable of
making a difference in achieving the objectives of financial reporting. Financial and
non-financial information is capable of making a difference when it has
confirmatory value, predictive value, or both. In the case, the financial statements
presented is capable of helping users to confirm the outcome of resource
management strategies during the period, and to predict an entity’s ability to
respond to changing circumstances and anticipated future service delivery needs.
Thus, based on the available information, the financial statement is relevant.

 Faithful representation: To be useful in financial reporting, information must be a

faithful representation of the economic and other phenomena that it purports to
represent. Faithful representation is attained when the depiction of the
phenomenon is complete, neutral, and free from material error. In this case, there
is no evidence of omission, bias or material error in the financial statement
therefore the statement is assumed to the faithfully represented. However, cash
flow statement is conspicuously missing in the set of the financial statements,
which may negatively affect completeness of the information.

 Timeliness: Timeliness means having information available for users before it

loses its capacity to be useful for accountability and decision-making purposes.
Having relevant information available sooner can enhance its usefulness as input
to assessments of accountability and its capacity to inform and influence decisions
that need to be made. A lack of timeliness can render information less useful.
Under the Public Financial Management Act 2016, covered entities are required to
submit their financial statement to relevant authorities within two months after the
end of the financial year. In this case the financial statement was submitted on
February 15, 2021 and therefore it can be said to be timely.

 Understandability: Understandability is the quality of information that enables

users to comprehend its meaning. GPFRs of public sector entities should present
information in a manner that responds to the needs and knowledge base of users,
and to the nature of the information presented. Understandability is enhanced
when information is classified, characterized, and presented clearly and concisely.
Comparability also can enhance understandability. In the current case,
understandability is undermined by lack of notes to the accounts which will

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 provide information on the accounting policy used and how the figures are
aggregated. Therefore, the financial statement is limited in providing
understanding to the users.

 Comparability: Comparability is the quality of information that enables users to

identify similarities in, and differences between, two sets of phenomena. The
financial statements provided budget and corresponding actual amounts for
purposes of comparability. Thus, it meets the requirement of comparability.

 Verifiability: Verifiability is the quality of information that helps assure users that
information in GPFRs faithfully represents the economic and other phenomena
that it purports to represent. It implies that different knowledgeable and
independent observers could reach general consensus that information represents
the economic and other phenomena that it purports to represent without material
error or bias; or an appropriate recognition, measurement, or representation
method has been applied without material error or bias. In this case, the financial
statements are submitted together with audit opinion which indicates that there is
some level of verification. However, the kind of audit opinion raised on the
financial statement is unknown from the available data therefore the verifiability
cannot be conclusively assessed.

(1 mark each for explaining 4 qualitative characteristics; 1 mark for relating it to

the case in point = 4 points for 2 marks each = 8 marks)

(Total: 20 marks)

EXAMINER’S COMMENTS
Question one was divided into two sub-questions, (a) and (b). In question (a), the
candidates were asked to discuss why many countries failed to implement the full
accrual public sector accounting system. The question was clear and very practical,
allowing candidates to demonstrate their command over the accrual accounting
policy implementation issues in the public sector. It is consistent with the outcome
weight assigned in the syllabus. The second sub-question provided a practical
scenario on financial reporting in the public sector, testing the candidates’
understanding and application of the relevant standard, specifically IPSAS 24, and the
qualitative characteristics of general-purpose financial reporting in the public sector.

The question was an application question that call for full application of candidates’
pool of knowledge. The 10-mark question was excellent in standard. In all, question
one was very clear, practical, unambiguous and consistent with the outcome weight
in the syllabus.

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QUESTION TWO
a)
CITIZEN TRANSPORT CORPORATION
STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDING
31/12/2020
Note GH¢’000 GH¢’000
REVENUE
GoG Subvention 2 1,540,000
IGF 36,376,130
Grants 8,250,000
Total Revenue 46,166,130
EXPENDITURE
Compensation 5 7,732,970
Goods and Services 6 15,663,152
Interest 1,650,000
Consumption of Fixed Assets 1,469,300
Other expenses 71,000
Total Expenditure (26,586,455)
Surplus 19,579,708

(9 marks evenly spread using ticks)

b)
CITIZEN TRANSPORT CORPORATION
STATEMENT OF FINANCIAL POSITION AS AT 31/12/2020
Note GH¢’000 GH¢’000
ASSETS
Non-current Asset
PPE 11 27,455,250
Intangible Asset: Software 11 745,950
Investment 1,345,000 29,546.200
Current Asset
Cash and Cash equivalent 294,818
Inventory 802,000
Receivable 371,550 1,468,368
Total Asset 31,014,568
LIABILITIES AND FUNDS
Current Liabilities
Payables 7 1,951,590
Non-Current Liabilities
Loan 8,250,000 10,201,590
Accumulated Fund 20,812,978
Total liabilities and Funds 31,014,568

(7 marks evenly spread using ticks)

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NOTES
2. IGF GH¢’000 6. Interest GH¢’000
Vehicle Valuation Service 4,575,000 Loan (20%x8,250,000) 1,650,000
Luggage fees 655,600
Parcel Service 906,600 7. Payable GH¢’000
Investment Income 8,600 Salaries payable 12,500
Other Income 211,430 G/S Payable 15,750
Fees from Driving School 9,996,270 Interest payable 1,650,000
Passenger fare and ticket 20,022,630 Withhold tax 90,500
36,376,130 Payable per trial balance 182,840
1,951,590
4. Compensation GH¢’000
Est. post 2,940,000 8. Grants GH¢’000
Allowance 856,670 50%x16,500,000 = 8,250,000
Non-Est. post 1,253,600
Employees compensation 2,372,200
End of service benefit 298,000 9. Stock of Spare Parts GH¢’000
Salaries outstanding 12,500 Spare parts (opening) 785,700
7,732,970 Add: Purchases 10,250,000
Less closing stock (802,000)
5. Goods and services GH¢’000 Spare parts available for 10,233,700
use
Legal cost 25,059
Consultancy cost 588,500 10. Loan GH¢’000
Seminars cost 500,000 50%x16,500,000 = 8,250,000
Training and Workshop 104,000
Vehicle insurance 658,700
premium
Workman Com. Prem. 889,800
Utility bills 560,053
Fuel and lubricant 1,550,780
Printing of ticket 399,160
Car washing cost 58,780
License ren. For drivers 78,870
G/S Payable 15,750
Spare parts available for 10,233,700
use
15,663,152

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 12. Fixed Assets Schedule
Plant and Motor Building Software Total
Machinery Vehicle
Cost 3,000,000 14,755,000 12,900,000 995,500 30,650,500
Addition 30,000 --------- -------- -------- 30,000
3,030,000 14,755,000 12,900,000 995,500 31,680,500
Depreciation
Accum. Depn. (252,000) (852,000) (756,000) (150,000) (2,010,000)
Chg. for the yr. (202,000) (737,750) (430,000) (99,550) (1,469,300)
454,000 1,589,750 1,186,000 249,550 (3,479,300)
NBV 2,576,000 13,165,250 11,714,000 745,950 28,201,200

PPE= P/M+M/Y+ BUILDING

=27,455,250

Statement of Accumulated Fund for the year ended 31/12/2020.

GHC′000
Balance b/f 1,205,270
Add. Prior Year Adjustment 28,000
Balance Restated 1,233,270
Add Surplus 19,579,708
Balance c/f 20,812,978

Overall mark allocation: Maximum of 64 ticks @ 0.25 = 16 marks

c) Guiding principles for formulating accounting policy

When management is formulating accounting policy the guiding principle is that
the policy should results in information that is:
 Relevant to the decision-making needs of users
 Reliable, in that the financial statement:
 Represent faithfully the financial position, financial performance, and cash
flows of the entity.
 Reflect the economic substance of transactions, other events and
conditions, and not merely the legal and form.
 Are neutral, i.e., free from bias
 Are prudent
 Are complete in all material aspects
 Consistent
(2 points @ 1 mark each = 2 marks)

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d) Change in Accounting Policy
An entity shall change an accounting policy only if the change:
 Is required by an IPSAS; or
 Results in the financial statements providing reliable and more relevant
information about the effects of transactions, other events and conditions on
the entity’s financial position, financial performance or cash flows.
(1 marks each for 2 point = 2 marks)

(Total: 20 marks)
EXAMINER’S COMMENTS
Question two examined candidates on preparation and presentation of financial
statements for a transport agency of government. It also tested them on accounting
policy formulation and change in line with the IPSAS 3: Accounting Policies, Changes
in Accounting Estimate and Errors. The question was standard, however the reference
to the entity in the question as a “public transport company” may have caused some
confusion in the minds of candidates as to whether it should be treated as a
government business enterprise (GBE) or not. Nevertheless, the additional
information to the trial balance made it clear that the entity applies IPSAS in the
preparation of financial statement.

QUESTION THREE
a)
i) Challenges of PFMS in Ghana
The following are some of the challenges the current PFM in Ghana is facing:
 Poor integration of the sub-systems of public financial management. The various
PFM systems are stand alone and therefore integration of the systems for efficient
output is lacking. This is the reason why the Ghana Integrated Financial
Management system (GIFMIS) have been implemented.
 Excessive human interface in the PFM process
Over reliance on the human being to conduct the PFM leads to abuse of systems
and procedure to achieve personal ends.
 Human factor
Integrity of the management of public financial management system is often
questioned due to increasing cases of corruption and other forms of malfeasance.
 Non-compliance to laws
There are adequate laws and rules to govern the public financial management but
most often these laws are disregarded in the discharge of public financial
management responsibilities.
 unpredictability of budgetary releases
Most often, budget is approved but timing of release is unpredictable. This makes
the budget unreliable.
 Weak Accountability and Transparency. External scrutiny and audit is weak and
sanctioning regime is very poor.
(Any 3 points @ 1 mark each = 3 marks)

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ii) Outcome of an orderly and open PFM system
The purpose of a good PFM system is to ensure that the policies of governments
are implemented as intended and achieve their objectives. An open and orderly
PFM system is one of the enabling elements needed for desirable fiscal and
budgetary outcomes:
 Aggregate fiscal discipline: effective control of the total budget and management
of fiscal risks.
 Strategic allocation of resources: planning and executing the budget in line with
government priorities aimed at achieving policy objectives.
 Efficient service delivery: using budgeted revenues to achieve the best levels of
public services within available resources
(3 points @ 1 mark each= 3 marks)

iii) PEFA Framework can help the Minister of Finance in establishing an orderly
and open PFMS in the following ways:
 It provides a framework for understanding the outcomes of an orderly and
effective PFM which will serve as a guide and direction for the configuration of the
system
 It sets out seven pillars of PFMS that can serve as the building block of an effective
PFMS for the country.
 It set out the indicators of effective PFM which could be used to assess the
effectiveness of the PFM of the country.
 It provides snapshot of the weakness and strength of the PFM system upon which
the Minister will endeavour to improve.
 It set out clearly the dimensions of measuring the indicators of the PFM that will
help in developing check list for better system.
(Any 4 points @ 1 mark each = 4 marks)

b)
i)
Anum District Assembly
Revenue and Expenditure Extract of Anum District Assembly for the year ended
31 December 2020
Revised Actual Budget Budget
Budget Performance Outturn Outturn
percentage
(%)
GH¢ GH¢ GH¢ %
Decentralised Transfer 35,000,000 42,000,000 7,000,000 20.00

IGF 45,000,000 33,000,000 (12,000,000) (26.67)

Compensation 20,000,000 25,700,000 (5,700,000) (28.50)
Goods and Services 18,000,000 24,000,000 (6,000,000) (33.33)
Non -Financial Asset 15,000,000 12,000,000 3,000,000 20.00

(20 ticks @ 0.25= 5 marks)

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ii)
REPORT
From
To
Date
Subject: ANALYSIS OF ANUM DISTRICT ASSEMBLY BUDGET REPORT
On the side of Revenue, the performance of the Assembly was not encouraging
since they made average revenue out turn of (6.67%). A closer examination on the
revenue recovered indicate that IGF reduced by 26.67% over the budget. This
could be as a result of not supervising the collections of these revenue. Covid 19
effects on performance of business and other economic activities of the Districts
could also be the cause.

However, on the side of Decentralised Transfers the Assembly’s performance was

encouraged since they generated greater revenues against the budget by 20%.
The budget report shown above indicate that the total spending of Anum District
Assembly was in excess of (16.42%) represented by total expenditure outturn.

However, a close examination of individual expenditure items reveals that

compensation of employee’s appropriation was exceeded by 26%. This could be
largely financed by virement of moneys from non-financial Assets. These could
also be financed from IGF Goods and Services was also over- spent by 33.33% and
this may affect services delivery capacity of Anum District Assembly since
operational expenses such as training, workshop and Conferences which are very
critical to staff have to be sacrificed.

Again, purchases of capital assets during the period was reduced as there was a
positive outturn of 20%. This could be as a result of cut made to meet the excess
expenditure on compensation of employees and Goods and Services.

In conclusion, the overall budget implementation was not encouraging as Anum

should have taking care of spending within the budget as far as compensation of
employees and Goods and Services Expenditure are concerned.

(1 mark for introduction and conclusions. Any 4 points @ 1 mark each = 5 marks)

(Total=20 marks)
EXAMINER’S COMMENTS
Question three had two sub-questions. Sub-question (a) examined candidates on
public financial management and the public expenditure and financial accountability
(PEFA) framework. The questions were very clear and practical. The marks allocated
were in line with the weight assigned in the syllabus. The second sub-question tested
candidates on the analysis and discussion of financial performance of a district
assembly. Candidates’ understanding of budget performance reporting and analysis
of budget outturn was tested in the question. The mark allocated is consistent with the
weight assigned in the syllabus. In all, question three was a high-quality question.

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QUESTION FOUR

a) Their Challenges are likely to be;

A tenderer shall be disqualified in public procurement process base on the
following reasons:
 Where the tenderer does not possess the necessary professional and technical
qualifications and competence,
 Where the tenderer has inadequate financial resources,
 Where the tenderer does not have necessary equipment and other physical
facilities,
 where the tenderer does not have managerial capability, reliability, experience in
the procurement object
 the tenderer does not have adequate personnel to perform the procurement
contract;
 where the tender does not possess the legal capacity to enter into the contract;
 where the tenderer is in receivership, bankrupt or in the process of being wound
up,
 where the tenderer has its business, activities suspended and subjected to legal
proceedings that would materially affect its capacity to enter into a contract;
 The tenderer has not fulfilled its obligations to pay taxes and social security
contributions
(Any 4 points @ 1 mark each = 4 marks)

b) Terms and practices used in Public Procurement

 Tender Security
Tender security means an amount to secure the fulfilment of any obligation of a
contractor, supplier or consultant, which may take the form of a financial deposit,
a surety bond, or an irrevocable letter of credit.
 Least Cost Selection
A procurement entity may use least-cost selection procedures for small value
assignments where the assignment is of a standard or routine nature and well-
established practices and standards exist
 Tender Evaluation Panel
It is an ad hoc committee that is set up by the Entity Tender Committee when
contract needs to be awarded. Their role is to evaluate tenders and send their
recommendation to the Entity Tender Committee to use it as a base to award the
contract.
 Board of Survey
It is composed anytime there is the need to dispose off government Stores or
Assets. They are to examine the condition of the Stores or Assets to be disposed
and submit report to the head of Entity Tender Committee on the condition of the
assets and best method of disposing these assets
(1.5 mark for each term explain = 6 marks)

c)

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i) Service concession asset (SCA)

Initial recognition
The grantor shall recognize an asset provided by the operator and an upgrade to
an existing asset of the grantor as a service concession asset if:
 The grantor controls or regulates what services the operator must provide with the
asset, to whom it must provide them, and at what price; and
 The grantor controls—through ownership, beneficial entitlement or otherwise—
any significant residual interest in the asset at the end of the term of the
arrangement.

In case of whole life asset, the grantor shall recognize an asset if the grantor
controls or regulates what services the operator must provide with the asset, to
whom it must provide them, and at what price. Grantor’s control over the residual
asset is not required since the asset is used up completely or significantly during
the service concession arrangement period.
Where an existing asset of the grantor meets the conditions of recognition of SCA
the grantor shall reclassify the existing asset as a service concession asset. The
reclassified service concession asset shall be accounted for in accordance with
IPSAS 17, Property, Plant, and Equipment or IPSAS 31, Intangible Assets, as
appropriate.

Subsequent recognition
After initial recognition or reclassification, service concession assets shall be
accounted for as a separate class of assets in accordance with PSAS 17 or IPSAS 31,
as appropriate.

Measurement of service concession asset

The grantor shall initially measure the recognizable service concession asset at its
fair value. Where the asset is an existing asset of the grantor which was reclassified,
it shall be measured at the carrying amount in line with IPSAS17 or IPSAS 31.

ii) Service Concession Liability

Service concession arrangements that create service concession assets,
correspondingly create service concession liabilities. For example, when an
operator constructs an incinerator worth GH¢ 4,000,000 for a District Assembly,
the Assembly will record asset of GH¢4,000,000 and a liability worth the same
amount.

Recognition
Where the grantor recognizes a service concession asset, the grantor shall also
recognize a service concession liability.

Measurement
The liability recognized shall be initially measured at the same amount as the
service concession asset (fair value), adjusted by the amount of any other

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 consideration (e.g. cash) from the grantor to the operator, or from the operator to
the grantor.

iii) Recognition of other revenues

The grantor shall account for revenues from a service concession arrangement,
other than revenues recognized under grant of rights to the operator, in accordance
with IPSAS 9, Revenue from Exchange Transactions. The operator may
compensate the grantor for access to the service concession asset by providing the
grantor with a series of predetermined inflows of resources, including the
following:
 An upfront payment or a stream of payments;
 Revenue-sharing provisions;
 A reduction in a predetermined series of payments the grantor is required to make
to the operator; and
 Rent payments for providing the operator access to a revenue generating Asset

In all these instances, the grantor accounts for these payments in accordance with
IPSAS 9. The timing of the revenue recognition is determined by the terms and
conditions of the service concession arrangement that specify the grantor’s
obligation to provide the operator with access to the service concession asset.

1.5 marks each for recognition of 3 elements = 4.5 marks

1.5 marks each for measurement of 3 elements = 4.5 marks
1 mark for overall explanations=1 mark
(10 marks)

(Total: 20 marks)

EXAMINER’S COMMENTS
Question four was in three sub-questions. The first examined the practical
implications of tendering from the tender’s perspective. The next tested the
understanding of some key terms in public procurement and the last sub-question
examined candidates on accounting for public private partnerships. The requirements
of the questions were very clear and precise. The quality of the question is
commendable.

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QUESTION FIVE
a)
i) Specific provisions in the constitution relating to budgeting
 Responsibility and Authority for National Budget: The President shall cause to
be prepared and laid before Parliament at least one month before the end of the
financial year, estimates of the revenues and expenditure of the Government of
Ghana for the following financial year.
 Budget system and budget presentation: The estimates of the expenditure of all
public offices and public corporations, other than those set up as commercial
ventures shall be classified under programmes or activities which shall be included
in a bill to be known as an Appropriation Bill and which shall be introduced into
Parliament to provide for the issue from the Consolidated Fund or such other
appropriate fund, of the sums of money necessary to meet that expenditure and
the appropriation of those sums for the purposes specified in that bill; and (b) shall
in respect of payments charged on the Consolidated Fund, be laid before
Parliament for the information of members of Parliament.
 Estimates of the Judicial Council: The Chief Justice shall, in consultation with the
Judicial Council, cause to be submitted to the President at least two months before
the end of each financial year, and thereafter as and when the need arises(a) the
estimates of administrative expenses of the Judiciary charged on the Consolidated
Fund under article 127 of this Constitution; and (b) estimates of development
expenditure of the Judiciary.
 Laying of Estimates of Judicial Council: The President shall, at the time specified
in clause (1) of this article, or thereafter, as and when submitted to him under
clause (3) of this article, cause the estimates referred to in clause (3) of this article
to be laid before Parliament.
 Restriction on alteration of estimates of Judicial Council: The estimates shall be
laid before Parliament under clause (4) by the President without revision but with
any recommendations that the Government may have on them.
 Procedure for presenting budget to Parliament: Parliament shall prescribe the
procedure for the presentation of Appropriation Bills.
 Supplementary Estimates: Where, in respect of a financial year, it is found that the
amount of moneys appropriated by the Appropriation Act for any purpose is
insufficient or that a need has arisen for expenditure for a purpose for which no
sum of moneys has been appropriated by that Act, a supplementary estimate
showing the sum of money required, shall be laid before Parliament for its
approval.
 Supplementary Appropriation Bill: Where, in the case of a financial year, a
supplementary estimate has been approved by Parliament in accordance with
clause (8) of this article, a supplementary Appropriation Bill shall be introduced
into Parliament in the financial year next following the financial year to which the
estimate relates, providing for the appropriation of the sum so approved for the
purposes specified in that estimate.
 Budget period: Notwithstanding the provisions of the preceding clauses of this
article, the President may cause to be prepared and laid before Parliament,
estimates of revenue and expenditure of Ghana for periods of over one year.

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 Unspecified votes: Whenever in the estimates prepared in accordance with clauses
(1) and (8) of this article provision is made for an item or vote other than for the
Contingency Fund, not relating to a specific item of expenditure, any moneys
voted by Parliament in respect of that item or vote shall be under the control and
supervision of a Committee which shall consist of the President, the Speaker and
the Chairman of the Council of State.
(Any 2 points @ 2 marks each = 4 marks)

ii) Citizens Budget and benefit

Citizens Budget is a form of budget that summarizes and explains basic budget
information. It is a report to the people, presented in an accessible format using
simple and clear language they can understand. The primary purpose of a Citizens
Budget is to increase their knowledge of what the government is doing and
enhance their capacity to participate in governmental affairs. (2 marks)

The benefits of citizen’s budget include:

• It is an effective way through which government can demonstrate that it holds
itself accountable to the general public by explain crucial fiscal policy information
and budget decisions in a form that is more readily understandable to ordinary
people can greatly enhance the government’s legitimacy in the eyes of the public.
• A Citizens Budget can also serve as a tool for civic education to engage the citizens
in fiscal policy decision making.
• It is believed that sharing information on Government policies and programmes
would deepen the quality of our democracy
• Citizens budget brings Government closer to the door steps of the people.
• It provides street level information on government fiscal policies and programme
to the people, therefore making it easy for government to popularize its policies
and programme.
(Any 3 points @ 1 mark each = 3 marks)

iii) Role Budget guideline and content

The budget guidelines provide comprehensive information on the policies,
constraints and procedures for the current budgeting at the Ministry,
Departments, Agencies. The Guidelines include instructions on the processes and
procedures, and preliminary budget ceilings to guide government institutions that
subsist on public funds, in the preparation of their budgets. (2 marks)

The Public Financial Management Act, 2016 (Act 921) provides for the content of a
budget guideline as follows:
 the economic outlook for the country;
 revenue forecasts;
 fiscal targets in relation to the fiscal principles, particularly, the need to achieve
sustainable levels of public debt and fiscal balance;
 medium-term fiscal framework including key assumptions;
 the multiple year ceilings for each covered entity in line with the Fiscal Strategy
Document;

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 the ceilings on the required number of staff for each covered entity and the cost of
appropriation for the relevant year for the public service;
 the reconciliation of any change to the previous Medium-Term Expenditure
Framework arising from the discretionary policy changes, baseline parameters,
and re-allocation of expenditure items;
 the selection criteria for investment projects, including provision for linking
forward recurrent expenditure estimates to investments;
 the ceilings for the preparation of the budget estimates of local government
authorities;
 details of expenditure under statutory funds and alignment and co-ordination of
statutory funds with fiscal objectives, targets and other aspects of the budget; and;
 any other information required from a covered entity to enable the Minister
prepare the annual budget in accordance with the requirements of the Public
Financial Management Act 2016.
(Any 4 points @ 1.5 marks each = 6 marks)

b) Where no IPSASs exist on a particular accounting issue, the policy should be based
on the use of management judgement. Management judgement should be
influenced by a consideration of the following factors:
 Relevance to the decision needs of users;
 Reliability of financial statements;
 The requirements of IPSAS in dealing with similar or related issues;
 Recognition and measurement requirements in other IPSASs;
 Established practices.
Once selected, it is required that accounting policies are consistently applied for
the preparation of financial statements from period to period; and within each
period, same policy should be applied for transactions of a similar nature.
Consistent application of accounting policies. (5 marks)

(Total: 20 marks)

EXAMINER’S COMMENTS
Question five examined candidates on budgeting in the public sector and the
application of IPSAS. Sub-question (a) tested candidates’ knowledge in legal
framework of budgeting, citizens; budget and budget guidelines. The questions were
clear and precise. The marks allocated were consistent with the weight assigned in the
syllabus. Sub-question (b) examined the knowledge of candidates on treatment of
transactions not covered by a specific IPSAS. The question was a good one, given that
it required the application of conceptual framework of financial reporting in the public
sector.

It should the noted that the paper had 100% coverage of the syllabus. Prospective
candidates are therefore advised to ensure that they learn to cover all topics in the
syllabus to the finest detail.

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 The question-by-question analysis of performance is summarised in Table 1.
Question Requirement Mark General Specific Observation
Performance
Question 1
a) Discuss why 10 Good. Some candidates outlined
countries failed to the reasons without
implement accrual discussing them. This
accounting system negatively affected their
performance.
b-i) Disclosure of 2 Average. Some candidates do not
budget information appreciate the application of
in the financial IPSAS 24.
statement,
b-ii) Qualitative 8 Good. Most candidates correctly
characteristics identify the framework
Many candidates only
explained the characteristics
without linking it to the
given financial statements.
Some candidates also
deviated completely. They
were computing certain
ratios which were not
required at all.
Question 2
a&b) Preparation of 16 Very Good Most candidates were
financial statement conversant with the topic.
Few could not classify the
item according to the GOG
chart of accounts.
Some provided notes on
accounting policies, which
were not required.
c) Principles for 2 Poor Many candidates did not
formulating answer the question.
accounting policy Most candidates failed to
identify the guiding
principles in accounting
policy formulation under
IPSAS 3.
d) Change in 2 Average Many candidates escaped
accounting policy the question
Familiar question but not
well answered.
Question 3

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 ai) Challenges of PFMS 3 Average Surprisingly, many
candidates could not explain
two challenges of PFMs in
Ghana
aii) PFM Outcome 3 Average Some candidates have no
idea about the PFM
outcomes.
aiii) Usefulness of PEFA 4 Poor Most candidates were
framework discussing the pillars of
PEFA instead.
bi Budget performance 5 Very Good Well answered. Some
report candidates unfortunately
failed to compare the actual
against the revised budget.
bii) Analysis Report 5 Average Some candidates failed to
prepare the report.
Some failed to analyse the
outturns
Question 4
ai) Why not winning 4 Average Most candidates were
tender writing down the
qualifications of tenders
instead,
aii) Explanation of 6 Average Many candidates could not
terms explain tender security and
board of survey well
bi-iii) Recognition and 10 Very poor Most candidates lack
measurement of knowledge in the area
service concession completely.
asset, liability and Few candidates attempted
revenues. the question well.
Question 5
ai) Constitutional 4 Poor Most candidates could not
provision on identify two provisions of
budgeting the Constitution on
budgeting. This is worrying,
as candidates must be
abreast with the
Constitution as a citizen.
aii) Citizen budget 5 Average Some candidates have no
idea about the concept.
aiii) Role of budget 6 Poor Many candidates could not
guideline outline the content of a
budget guideline
b) Consideration in 5 Very poor Most candidates could not
making accounting handle the question well.

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 policy where no
IPSAS exists.

CONCLUSION AND RECOMMENDATIONS

The questions were standard, balanced and very clear with extensive coverage.
However, the performance of the candidates was not encouraging, as only 18% passed
the paper. At an exit meeting of the examiners, the following specific weaknesses were
pointed out for prospective candidates’ attention:
 Most candidates failed to read and understand the requirements of the
questions well before starting to produce responses. For example, question 2(b)
reproduced the financial statements of Assembly and asked questions on
qualitative characteristics. Meanwhile some candidates saw the financial
statement and concluded that the question was on computation of financial
ratio and proceeded to compute some ratios.
 Some candidates were not able to express themselves clearly and
professionally.
 Many candidates could not attempt all question, likely because of poor time
management in the examination.
 Some candidates over-concentrated on the preparation of the financial
statement thereby ignoring the other two sub-questions following it.
 Some candidates did not prepare well for the paper and this was obvious in the
poor quality of the responses to the test items.

The following recommendations were made to assist prospective candidates in

improving their performance in the paper:
 candidates should prepare very well for the paper. This means that the
candidate should study the ICAG Study Manual and work through the
Question Bank. It is also advised that the candidate should enroll in a Partner
in Learning (PIL) for quality tuition and guidance.
 Candidates must read the requirements of questions very well and plan their
responses before writing them down. This way candidates will avoid
deviations in their responses.
 Candidates should learn to cover all topics in the syllabus before sitting for the
examination. The examination policy is to examine candidates on all aspects of
the syllabus every diet.
 Time management is key in passing the examination. candidates are
encouraged to allocate time to every question based on the mark or weight of
the question. For example, a 10-mark question requires 18 minutes of response
time. Most often, candidates spend too much time on financial reporting
questions at the expense of other equally important questions.
 Candidates who have been exempted in all subjects in level 2 except for Public
Sector Accounting and Finance (Paper 2.5), are advised to desist from the
temptation of underrating the paper. The paper required current knowledge
and practical appreciation of typical public sector financial management issues.

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Those candidates must equally prepare for the paper just like all other
candidates do.

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