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Public Sector Accounting and Finance

Public Sector Accounting and Finance is an introductory subject to all Public Finance Students. Topics such as Taxation, Accounting standards, government expenditure among others are discussed in this blog

It has come to the notice of the general public and especially the students of the Institute of Chartered Accountants – Ghana (ICA –GH) about the unavailability of a precise and concise study manual specifically for the Institute’s subject ‘PUBLIC SECTOR ACCOUNTING AND FINANCE’.

Although the institute has recommended some books to students to buy and study to enable them prepare for the exams, these books contain a lot of ‘non-syllabus’ items which makes studying the subject quite cumbersome. Students continue to complain because, they prepare and study a lot of things but enter the exams hall with very little to write for the allotted marks for a question. This has caused a lot of students failing the exams over the years.

This ‘menace’ has come to the notice of Premium Education and Business Consult (PEC), an online Education and Business Consultancy firm and so we decided to begin a journey of addressing the problem by writing a single study text which is purely relevant to the ICA-GH examination.

Advanced Audit and AssuranceAudit and AssuranceBusiness Management and Information SystemsCorporate FinanceCorporate ReportingManagement AccountingPublic Sector Accounting and FinanceStrategic ManagementTaxation and Fiscal Policy

PREMIUM ICAG MAY 2018 MOCK EXAMINATION

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Thank you for visiting our website today. Our team of Expert Professional Educators has put together the following  mock examination questions with suggested solutions for the May 2018 examination.

Check them out and share with other colleagues to increase their chances of passing as well.

To JOIN our class next semester, fill our Online Admission Form  or send us an Email .

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FR – 2018 QUESTIONS

FR – 2018 SOLUTION

MA – 2018 MOCK

MA – MOCK 2018 SOLUTION

PSAF – 2018 MOCK QUESTION

PSAF – 2018 MOCK ANSWERS

CSEG – MOCK QUESTIONS – 2018

CSEG – MOCK ANSWERS – 2018

FM- MOCK 2018

FM – MOCK SOLUTION

Read on various subjects on our Website

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Advanced Audit and AssuranceAudit and AssuranceBusiness Management and Information SystemsCorporate FinanceCorporate ReportingFinancial ManagementFinancial ReportingManagement AccountingPublic Sector Accounting and FinanceStrategic ManagementTaxation and Fiscal Policy

JOIN OUR REVISION SESSION

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Join our revision session for ICAG May 2018 Examination.

Thank you for visiting our website today. Our team of Expert Professional Educators has put together the following documents, analysis and revision time table for the May 2018 examination.

Our revision session comes in three segment; Revision classes, Mock examination and Mock discussion.

Check them out and share with other colleagues to increase their chances of passing as well.

To sign up for the Revision Session, fill our Online Admission Form  or send us an Email .

If you have any question and want personalize assistance then email Nhyira Premium .

Read on various subjects on our Website

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Download all your notes here

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MODULE 1 – Conceptual Framework

MAY 2018 REVISION TIME TABLE

HIRE PURCHASE ACCOUNTS

FINANCIAL STATEMENTS IN THE PUBLIC SECTOR

BUDGETING AND BUDGETARY CONTROL

1522229395606_PEH-Level-three-MAY-2018

PSAF – Solution

PSAF – Questions

PEH-Level-two-MAY-2018

PEH – Level one (MAY 2018)

MODULE 7 – Public fund

MODULE 4 – Envirnmental Analysis

MODULE 3 – Regulatory Framework

POSSIBLE EXAMINABLE AREAS – Public Sector

We wish you the very best as you write your Examination.

 

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EducationPublic Sector Accounting and Finance

BEST GUIDE TO GHANA’S PUBLIC PROCUREMENT [UPDATED]

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Ghana Public Procurement refers to the process through which goods, services and works are financed either wholly or in part by public institutions (MDAs/MMDAs) for public purposes in Ghana.

Public Procurement is governed by an Act of Parliament called the Public Procurement Act, 2003 and led by a Board with a Chief Executive Officer and a Minister of Procurement.

Scope of Application of the Act

  • The Act applies to the procurement of goods, works and services financed in whole or in part from public funds except where the Minister decides that it is in the National interest to use a different procedure.

It applies to:

  • Central management agencies
  • Ministries, Departments and Agencies (MDAs)
  • Subvented agencies; these are organizations funded by government to undertake projects.
  • Government institutions
  • Public Universities, public schools, colleges and hospitals
  • Bank of Ghana
  • Among others.

Structure of the Public Procurement

The structure of the Public Procurement in Ghana is as follows:

PUBLIC PROCUREMENT BOARD

PROCUREMENT ENTITY (IES)

        TENDER COMMITTEE                       

   TENDER EVALUATION PANEL                 

   TENDER REVIEW BOARDS              

       LOCAL GOVERNMENT

1.1.       Functions of the Public Procurement Authority

The Public Procurement Authority (Board) oversees the entire Public Procurement in Ghana. Below are some of the functions of the Board:

  • Make proposal for the formulation of policies on procurement
  • Monitor and supervise public procurement in the country
  • Development of Public Procurement documents (rules, directives, instructions, other regulations)
  • Preparation and presentation to annual report on procurement
  • Government advisor on public procurement issues
  • Maintenance of public procurement entities.

What the Public Procurement Authority does not do:

  • Procure for or on behalf of any Government Entity
  • Award any contract for or on behalf of any Government Entity
  • Invite tenders for or on behalf of any Government Entity

Expenses of the Board; Parliament through appropriation grants the Board with such money as it may require.

Accounts and Audit; The Board shall keep records and prepare annual accounts as prescribed by the Controller and Accountant General and approved by the Auditor General.

1.2. Procurement Entity:

A Procurement entity is responsible for procurement of goods, services and works.

The Minister may in consultation with the Board by notice in the Gazette declare any entity or individual to be a procurement entity and shall carry out its duties as laid down in this Act or by the Board.

 1.3.  Tender Committee:

Each Procurement Entity shall have a Tender Committee that will be responsible for:

  • Ensuring that each stage of the Procurement activities in this Act and recommended by the Board.
  • Ensuring that the Procurement Entities exercise sound judgment in making procurement decisions
  • Referring to appropriate Tender Review Board for approval beyond its authority.

1.4. Tender Evaluation Panel

  • This Panel has the expertise to evaluate tenders and assess the Tender Committee in its work.
  • They shall evaluate each tender according to the pre-determined and publish evaluation criteria.

1.5. Tender Review Boards (TRB)

At each level of the Procurement process, the TPB is established;

  • Central TRB
  • Ministerial TRB
  • Regional TRB
  • District TRB

NOTE: The Public Procurement (Amendment) Act 2016 (Act 914) has brought dissolution of District and Ministerial for TRB.

Functions

  • Approval of the Procurement process by the Procurement Entity
  • Furnish the Procurement Board with annual report
  • Participate in Public Procurement forums
  • Review the decisions of heads of entities in respect of a complaints.

The procurement process.

Ghana Public Procurement process that Procurement Entities follow in making procurement decisions for government entities can be summarized as follows:

Procurement Plan

A Procurement Entity prepares a Procurement Plan and submits its approved programmes and plan for approval by the Tender Committee and shall indicate:

  • Contract packages
  • Estimated cost for each contract packages
  • The procurement methods
  • Processing steps and time
  • Among others

Qualification of Tenders

A tenderer in Public Procurement shall

  1. Possess the necessary:
  • Professional and technical qualifications and competences
  • Financial resources
  • Equipment and other physical facilities
  1. Have the legal capacity to enter the contract
  2. Be solvent; not bankrupt
  3. Pay taxes
  4. Directors of the tenders are qualified and not declared bankrupt or illegal behavior
  5. Pay Social Security Fund and pay all compensation for pollution if any.

Pre – qualification Procurement

A Procurement Entity may engage in pre- qualification proceeding to identify tenderer who are qualified prior to the submission of tenders.

Rejection of tenders, proposals and quotations

A Procurement Entity may reject any tender when the tenderer fails to meet a qualification in the predetermined or published requirement. The grounds for rejections shall be communicated to the Tenders.

Methods of Procurement

  1. Competitive Tendering:

This method of procurement is used by the Procurement Entity when it has the specific/formulate detailed speculations for the goods and gives all tenders equal opportunities.

  1. Two – Stage Tendering:

This method is used when the Procurement Entity does not have specific specifications for the goods or services. The first stage gives tenderer opportunity to furnish the Procurement Entity with likely specifications which will meet the needs of the Procurement Entity and after that, the second stage is where each tenderer is given opportunity for bid for the contract.

  • First stage (Invitation Document)
  • Second stage (Tender proceedings)
  1. Restricted Tendering

A Procurement Entity may for reasons of economy and efficiency and subject to the approval of the Board engage in procurement by means of Restricted Tendering.

Condition:

  • If the goods, services or works are available from only limited number of suppliers or contractor.
  • If the time and cost required to examine and evaluate a large number of tenders.
  1. Single – Source Procurement

A Procurement Entity may engaged in this method under section 41 with the approval of the Board.

Conditions:

  • Where goods, works or service are only available from a particular supplier or contractor.
  • Where there is an urgent need for the goods, works and services
  • Where there is an additional requirement from a supplier or contractor who has supplied the Procurement Entity with goods, services or works.
  • Where the Procurement Entity thinks in the best interest of National security a Single – Source Procurement method is used.

Tendering Procedures: There are two tendering procedures namely; National and International.

National Competitive Tendering:

This is where the Procurement Entity decides that only domestic suppliers or contractors may submit tenders.

International Competitive Tendering:

This is where the Procurement Entity decides to allow foreign firms or tenders to tender or bid for the contract.

Procedure for Inviting Tenders

A Procurement Entity shall invite tenders by publishing a document called Invitation to Tender in the newspaper. If it’s an International Competitive Tendering, the document must also be published in at least one International newspapers.

Contents of Invitation to Tender

  • Name and address of the Procurement Entity
  • Specification of goods and place of delivery
  • Time of delivery
  • Criteria and procedure for evaluation
  • Means of obtaining the Invitation of Document
  • The price and currency as well as means of payment for the Invitation Document
  • The place and deadlines for submission of Tenders
  • The place, time and date for the opening of bids.

Clarification and Modification of Tender documents

  • A supplier may request promptly clarification of the tender documents from the Procurement Entity. The Procurement Entity shall within reasonable time before the deadline for the submission of Tender respond to the request.
  • The Procurement Entity may modify the Invitation Document by issuing an addendum (textual matter added onto the publication) prior to the deadline for the submission of tender.

Examination of Tenders

The Procurement Entity may ask a supplier or contractor for clarification of its tender in order to assist in the examination, evaluation and comparison of tenders.

Evaluation of Tenders

  • The Procurement Entity shall evaluate and ascertain the successful tender in accordance with the procedures and criteria set out in the Invitation Document.
  • Upon choosing the successful tenderer, the necessary documents are assigned and come into effect.

Methods and Procedures to Procure Consultants.

It follows the same procedures as under goods.

  • Review

Right to Review:

Any supplier that claims to have suffered any loss or injury due to a breach of a duty imposed on the Procurement Entity by this Act on;

  • The selection of a method of procurement
  • The choice of a selection procedure
  • The limitation of procurement proceedings
  • The decisions by the Procurement Entity.

Review by Procurement Entity

A complaint shall in writing be submitted to the head of the Procurement Entity either before the or after the procurement contract comes into force. The Procurement Entity shall within 21 days after the submission of the complaint, issue a written decision concerning the complaint.

Administrative Review

If a supplier lodges complaints to the Procurement Entity and the Procurement Entity’s response/decision doesn’t suit the supplier, an official complaint is sent to the Public Procurement Authority (PPA).

  • Upon the receipt of a complaint, the authority shall give notice of the complaint promptly to the Procurement Entity.

The decision by the Authority may be either;

  • Declare the legal rules/principles that govern the subject – matter of the complaint
  • Annul in whole or in part an illegal act or decision of the Procurement Entity.
  • Revise an illegal decision by the Procurement Entity or substitute its own decision for the decision of the Procurement Entity.
  • Order that the procurement proceeding be terminated.

Disposal of stores, Plant and Equipment

Authority to dispose

  • The head of a Procurement Entity shall convene a Board of Survey comprising representatives of departments with surplus, unserviceable and absolute stores and Plant & Equipment.
  • The Board of Survey recommendations is approved by the head of the Procurement Entity as to how to dispose the stores.

Procedures for Disposal

  • Transfer to government departments
  • Sale by public tender to the highest tender(s)
  • Sale by public auction
  • Destruction, dumping or burring as appropriate.

Procedures for Procurement at the District Assembly Level (Local Government)

  • The storekeeper or head of spending units raises requisition by completing the Activity and Expenditure Initiation forms which is approved by the Heads of MDAs/MMDAs/Administration.
  • Procurement Officer makes requests for quotation by inviting bids from potential surplus.
  • Tender Committee reviews the bids and selects a supplier.
  • The Procurement Officer prepare the Purchase Order and sent to the Accountant to ensure that the transaction is properly charged and to commit the transaction against the Budget Allocation (Warrant) of the MMDAs.
  • The accountant authorizes the Purchase Order and approve by the Head of the MDAs and MMDAs as a warrant
  • The Purchase Order is sent to the supplier, goods is received and inspected by storekeeper and the Audit team.

WEAKNESSES OF THE PUBLIC PROCUREMENT IN GHANA

The procurement Act of Ghana, Act 663 (2003), was enacted and promulgated by parliament of the republic of Ghana to, among other things; bring sanity and conformity to public procurement by instituting bodies and principles that harmonizes the public procurement process and activities.

Even though the Act is good, it has some disadvantages which may include the following:

  1. Lack of Clear Procedure for Emergency Procurement
  2. Slow Pace in Regularizing the Draft Regulations
  3. Lack of Qualified Procurement Personnel
  4. High Cost of Advertisement

 

Public Procurement Authority, OECD Principles

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Public Sector Accounting and FinanceTaxation and Fiscal Policy

INFORMATIVE GUIDE REGULATORY FRAMEWORK OF PUBLIC SECTOR ACCOUNTING

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INTRODUCTION

The regulatory framework refers to the regulations and Acts as well as directives and circulars about managing public resources or fund.

It has become almost like a maxim or a cardinal principle in every state that before any institution in the state can obtain government recognition or funding, if necessary it must be shrouded in governmental legality, quasi-legality or some government regulations. As such, almost every institution of the government is covered by laws and regulations.

While Laws are enabling acts, regulations on the other hand emanate from the Law and guide the day to day activities of the institution.

The legal regulatory that regulates public sector financial operations in Ghana include:

  • The 1992 constitution
  • The Financial Administration Act (2003) Act 654
  • The Financial Administration Regulation (2004) L.I. 1802
  • The Internal Revenue Act
  • The Customs Excise and Preventive Act
  • The Bank of Ghana Act
  • The District Assembly Common Fund Act
  • Procurement Agency Act (2003) Act 663
  • Audit Service Act (2000) Act 584
  • Internal Audit Agency Act (2003) Act 658
  • Local Government Act
  • Any other regulation that the parliament may enact from time to time.

Role of Regulatory Authorities

  1. THE EXECUTIVE (Office Of The President /Cabinet)

Decisions on government policies with regards to financial outlay are taken by the office of the President together with the Cabinet representing the executive arm of government.

In the course of making decisions with financial implications, the executive arm of government must exercise careful control about appropriations. This is because; the decisions must be approved by parliament.

2. PARLIAMENTARY CONTROL (Legislative Arm Of Government)

According to the rules in the 1992 constitution of Ghana, no revenue shall be levied or expenditure incurred except as authorised by parliament.

Parliamentary financial control is exercised in three different phases namely; appropriation, audit and review by public accounts committee.

Appropriation

Before parliament approves the utilisation of public funds it follows certain basic rules of financial controls, namely;

  • Appropriate budget authority
  • Appropriate budget period
  • Appropriate budget classification
  • Appropriate budget reallocations approved by the MoFEP (Minister of Finance and Economic Planning)
  • Value for money
  • Payment are for purposes for which they are intended
  • Documents supporting expenditure are valid and appropriate
  • Relevant rules and regulations pertaining to the expenditure will be adhered to
  • Expenditure will be subject to internal and external audit scrutiny.

Audit Control

To ensure that the rules on appropriation of public funds are followed, parliament has the power to approve the appointment of the Auditor General to examine both the accounts of the executive arm of government and all spending units (Metropolitan, Municipal and District Assemblies – MMDAs & Ministries Departments and Agencies – MDAs) and also to assist it to ascertain that rules governing procedures on expenditure and principles of public sector accounting have been applied. The Auditor General is also obliged to report to parliament any non-adherence to the law and also draw the attention of parliament to instances of wasteful expenditures, losses, malfeasance, etc.

Review by the Public Accounts Committee

The public accounts committee does a thorough study of the audited accounts of the government which is submitted to its office. It examines breaches of the law or waste, and summons MDAs and MMDAs to account for their stewardship.

Public Accounts Committee

For completeness, Article 187 (6) of the Constitution enjoins Parliament first to debate the report of the Auditor-General, and second, to appoint where necessary, in the public interest, a committee to deal with any matters arising from its study of the report. Parliament therefore requires the Auditor-General to perform its oversight function over the executive use of public resources. This committee in parliament examines the Auditor-General’s report together with the Public Accounts in detail and sort “grill” departmental heads on financial authorization, compliance and avoidance of gross extravagance.

However, invariably, the committee does not seem to have power to surcharge or dismiss but it can question and reprimand and direct the implementation of recommendations by the Auditor-General; as such “tough skinned” public officials are not perturbed by their activities.

Reasons for Parliamentary failure to control expenditure

(i) Political stands of Parliamentarians supporting their parties

(ii) Lack of resources to operate efficiently

(iii) Lack of training or technical skills to deal with the issue

(iv) Self benefits from the non-control

(v) Late submission of the Auditor-General’s report to Parliament

(vi) Ministers doubling as Parliamentarians

(vii) Lack of legal framework to deal with issues

3. The Controller and Accountant General’s Department (CAGD)

Statutory Duties

Section 3 (Financial Administration Act, 2003) Act 654

1. Responsible to the minister of finance for the custody, safety and integrity of the consolidated fund and other public funds under his care;

2. Responsible for compilation and management of the consolidated fund and other public funds;

3. He is the chief accounting officer of the government responsible for keeping, rendering and publishing statements of public accounts as required by law;

4. He is the chief advisor to the minister of finance and the government on accountancy matters;

5. He approves departmental accounting instructions and promotes the development of efficient accounting systems within departments;

6. He is responsible for receipt, secure custody of public moneys payable into the consolidated fund.

7. He authorizes the opening of bank accounts of MDAs and MMDAs

8. In consultation with the auditor general, he specifies for departments, the accounting basis, policies and classification system to ensure proper system of accounting;

Regulatory Control Duties

The regulatory control duties of the controller and accountant general in public financial management are as follow:

  • Relating each spending department’s requirements to the economic resources estimated to be available and to the total claims on them;
  • Keeping public expenditure within total resources for the year;
  • Advising departments on economic and financial policy, via treasury circulars;
  • Controlling government expenditures through co-ordination and monitoring operations of MDAs and MMDAs;
  • Considering matters covered by the reports of the public accounts committee of parliament and co-operating to improve financial control;
  • Initiating programmes to improve financial management, including the provision and guidance improvements, in public sector accounting.

4. The Auditor General

Statutory Duties:

1. Section 11, Audit Service Act, 2000 (Act 548)

The public accounts of Ghana and of all public offices, including the courts, the central and local government administrations, of the universities and public institutions of like nature, of a public corporation or other body or organization established by an act of parliament shall be audited and reported on by the auditor general.

2. Section 13- Examination of Accounts

The auditor-general shall examine in such manner as he thinks necessary the public and other government accounts and shall ascertain whether in his opinion:

a. The accounts have been properly kept;

b. All public monies have been fully accounted for and rules and procedures applicable are sufficient to secure an effective check on the assessment, collection and proper allocation of the revenue;

c. Monies have been expended for the purpose for which they were appropriated and the expenditures have been made as authorized;

d. Essential records are maintained and the rules and procedures applied are sufficient to safeguard and control public property; and

e. Programmes and activities have been taken with due regard to economy, efficiency and effectiveness in relation to the resources utilized and results achieved.

Other Duties

Section 12 – audit of foreign exchange transactions

Section 14 – audit of statutory corporations;

Section 15 – examination of annual statement of public accounts prepared by controller and accountant general;

Section 16 – submission of special audit report to parliament;

Section 17 – disallowance of surcharge.

5. THE MINISTER OF FINANCE AND ECONOMIC PLANNING

Roles of the Minister of Finance and Economic Planning (MoFEP)

  • Develops and implements macro-economic and fiscal policy framework for the country;
  • Supervises and monitors the finances of the country;
  • Co-ordinates international and inter – governmental financial and fiscal relation;
  • Advises the government on the total resources to be allocated to individual programmes and activities within the sector;
  • Develop preliminary ceilings by allocating total resources between sectors on the basis of government priorities. These ceiling are approved by Cabinet.
  • Conducts budgets hearings, reviews and finalises budget statement;
  • Presents to parliament, the fiscal policy of the government and a statement of the current and projected state of the economy (budget), not less than once a year.

6. The financial duties of a head of department are:

(1) Management and operate the department’s accounting systems, so as to ensure the accountability of all officers transacting business and facilitate the efficient discharge of such business

(2) To ensure that the department’s accounting system has been approved by the Controller and Accountant-General in consultation with the Auditor-General.

(3) Secure the efficient and effective use of appropriations under departmental control within the ambit of government policy and in compliance with any enactment or of instructions issued under the authority of any enactment

(4) Secure the due and proper collection of government revenue collectable by department within the terms of any enactment or of instructions issued or approved by the Controller and Accountant-General

(5) Request, commit, order, receive and make payments for goods and services within the funds appropriated to the department and in accordance with this regulations and any other enactment

(6) Receive and order the disbursement of any trust moneys for which the head of department has been appointed as administering authority by or under any enactment or agreement

(7) Manage and reconcile the bank accounts authorised for the department by the Controller and Accountant-General

(8) Preserve in good order and secure the economical use of all equipment and stores used by the department

(9) Transact any other financial business for which the head of department is made responsible, by or under any enactment in accordance with the requirement of the enactment or instructions issued or approved by the Minister

(10) Compile and maintain assets register of the department as determined by the Controller and Accountant-General

(11) Appear before the Public Accounts Committee to give any explanations required by the committee in respect of annual departmental accounts

(12) Answer questions raised by the auditor-General in respect of financial transactions and accounts of the department

(13) Prepare, sign and submit within three months after the year end, to the Minister, auditor-General and Accountant-General, annual departmental accounts in the form prescribed by the controller and Accountant-General in consultation with the auditor-General.

FACTORS TO BE CONSIDERED BY GOVERNMENT TO EXERCISE THE SOVEREIGN AUTHORITY OF THE STATE

The sovereign authority of the state is the power of the government to tax, borrow and create money to meet the aspirations of the Ghanaian public and raise their standard of living.

The following are the factors that the government should consider in exercising this authority are as follows:

The four factors are:

1. Objectives of the state (vision of government)

2. Fiscal policy (taxation etc.)

3. Monetary policy (inflation, money supply etc.)

4. The estimates (costing of activities)

1. The objectives of the state: This varies from period to period and depends on which government is in power. The broad national objectives are captured in the Directive Principles of state policy in the nation’s constitution a decade ago; the objective was vision 2020, a brand policy to move Ghana to the middle income status. This objective was to move the timeframe to 2015 with the launch of Growth and Poverty Reduction Strategy. At present there is a new policy direction with four thematic areas:

– Investment in human capital.

– Expansion of infrastructure.

– Job creation.

– Transparent and accountable governance.

2. Government fiscal policy is the term used for the government’s policy of taxation, payments and financing deficit gaps. The government raises through taxation to carry out its program. It is the amount through taxation is insufficient, for the budgeted program then other means of raising funds are used to meet the deficit. This is normally achieved by borrowing on the local market by means of treasury bills or borrowing externally from multi-donor institutions like IMF and World Bank or look for grants or donations.

3. The supply of money in the economy determines economic activity and the prevailing price level. Attention is therefore focused on bank of Ghana and its attempt to regulate the money supply of the country. Economists believe that if the supply increases beyond the normal increase in economic activity (about 4 -5 %p.a.) inflationary spending ensues.

Similarly, if the growth in the money supply is below the level of economic activity recessionary tendencies increases.

4. The annual estimates are prepared in quantitative terms using the government chart of accounts and MTEF principles of planning and programming.

From the annual estimates government is able to know.

  • Projected revenue and expenditure for the year.
  • The allocation of funds for various functions and program including administration, service and investments.
  • Whether it will have surplus or deficit in its current accounts and to plan whether to borrow or invest funds.
  • And to decide on the appropriate level and structure of public debts.

Further reads: IFAC, academia.edu, this blog

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Public Sector Accounting and Finance

GUIDE TO PUBLIC SECTOR ACCOUNTING SYSTEMS [UPDATED]

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Introduction

The public sector accounting system is actually a series of systems and subsystems that track the financial activities of government and government agencies.

Financial management of the Government is concerned with budgetary and financial operations of both individual departments and agencies and the Government as a whole.

Objectives of Public sector accounting systems

  • It enhance full disclosure of the financial results of department and agency activities;
  • To the enable the production of adequate financial information needed for departments and agency management purposes;
  • For the effective control over and accountability for all funds, property, and other assets for which each department and agency is responsible;
  • It gives a reliable accounting reports to serve as the basis for preparation and supporting of department and agency budget requests to control the execution of the budget and to provide financial information;
  • It enhances a suitable integration of department and agency accounting with the central accounting and reporting operations of the Treasury Department.

Techniques for Accounting in the Public Sector

In the public sector, techniques of accounting depend on financial decisions which are usually formulated on the basis of the information generated from the accounting systems, and also on the type of fund operated.

 

The techniques may be summarized as follows:

  1. Vote Accounting It is concerned with the receipt, custody, disbursement, and transfer of public and trust monies as required by law.
  2. Fund Accounting A fund is an independent accounting entity and must be accounted for using a separately identified set of accounts in such a way that it is possible to identify the specific assets and liabilities that represent the balance on the fund.

Reasons / uses of Fund Accounting

  1. It allows for the demonstration of fiduciary stewardship. That is, it shows that resources have been handled in a proper way through proper procedures.
  2. It assists in reaching fund’s objectives based on policies and program, requirements of its implementation, monitory and evaluation
  3. It provides rules of accounting and responsibility of stewards who operate the funds.
  4. In the public sector, diversity of functions and restrictions on how certain resources may be used makes it necessary to focus attention on individual areas of operation and to segregate resources provided for specific purpose. This is made possible by the use of Fund Accounting.
  5. Financial reporting on government is seen as a series of reporting units and Fund Accounting allows some flexibility in defining reporting units as entities as entities within an explicit frame work of controls.
  6. Project Accounting It involves controlling, measuring and analysing the activities and lifeline of a specific project.
  7. Donor Support Accounting This is concerned with receipts, custody and disbursement of the financial donation of donor or support organizations.
  8. Environmental Accounting

Environmental Accounting is the process incorporating environmental issues into the government financial reporting systems.

Environmental Accounting is often referred to as Green Accounting which incorporates environmental assets and their source and side functions into national accounts.

Reasons for considering Environmental Accounting

  1. Possible revenue generation may off-set environmental cost.
  2. Environmental cost and benefits may be over-looked or hidden in overhead accounts.
  3. Possible significant reduction or elimination of environmental costs
  4. Benefitting from environmental products and services to the citizens
  5. Can support the development and running of an overall Environmental Management Systems (EMS) which may be required by regulation for some types of businesses.
  6. Positive impact on human health by improving environmental conditions.
  7. May result in more accurate costing or pricing of products and more environmental desired processes.

Benefits of the accounting systems

  • Formulate the general objectives of the agency and co-ordinate the policies of individual’s financial needs of the various units.
  • Relate each spending units requirements to the economic resources estimated to be available and the total claims to them.
  • Keep expenditure within total resources of the year.
  • Advise management and each unit about financial control measures of the agency.

Chart of Accounts

Definition of CoA

CoA is a structured set of codes that provides a framework for Recording, Classifying, and Organising Budget Data and Accounting Transactions into Reports and Statements. It provides various perspectives of financial transactions and facilitates budgetary controls.

This technique of revenue and expenditure classification is very necessary to show the complex nature of government or public sector accounting. On the chart of accounts MDAs and MMDAs are used as expenditure heads and it is possible to trace revenue collected into the Consolidated Fund to its primary source.

Segments of the harmonised CoA

  1. Institution Segment- This segment is used for coding an Institutional Unit which stands as an economic entity. An institutional unit as defined in the GFS 2001 Manual “is an economic entity that is capable, in its own right, of owning assets, incurring liabilities, and engaging in economic activities and in transactions with other entities. These entities should be treated as separate government units if they maintain full sets of accounts, own goods or assets in their own right, engage in non-market activities for which they are held accountable at law, and are able to incur liabilities and enter into contracts.”
  2. Funding Segment – The Funding segment provides a means to track the source of funding for expenditures within a consolidated reporting scheme. Expenditures are assigned against the appropriate funding code, independent from the organizational or program structure.
  3. Functional of Government (COFOG) Segment – This segment provide coding for functional classification of expense to provide a strategic view of the allocation of budget resources between different sectors of the economy. This is based on the United Nations Classification of Functions of Government (COFOG). It is a detailed classification of the functions, or socioeconomic objectives (e.g., health, education, defence, etc.), that Government units aim to achieve through various programmes.
  4. Organisational Segment – The Organizational segment provides the basis for establishing the responsibilities for the day-to-day administration of government business. The structure of the organizational hierarchy is reflected in the series of codes for ministries, departments and agencies (Cost Centres/ Spending Units) reporting under the Sector Ministries.
  5. Program and Sub-programme Segments – These segments provide the basis for recording transactions associated with a specific program or sub-program that is operating under an organizational unit
  6. Activity Segment – This segment provides classification of various activities related to specific programmes, sub-programmes or outputs.
  7. Location Segment – Provides geographical location of an institution, organisation, programme, etc. based on established political and administrative districts of Ghana.
  8. The Natural Accounts segment – This is an Economic Classification which provides the basis for recording specific activity by the kind of transactions by which the Government performs its functions. This segment provides classification and coding for revenue, expenditure, liabilities, etc.

Uses of harmonized chart of accounts may also he explained as follows:

  1. Harmonization of accounts of MDAs and MMDAs;
  2. Uniform classification of accounts in public financial management;
  3. Control of accounts in public financial management;
  4. Tracking of revenue and expenditure in public financial management;
  5. Efficiency and effectiveness in budgetary resource allocation; and
  6. Design of audit trail

Further reads: Ghana, Researchgate, this blog

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Public Sector Accounting and FinanceTaxation and Fiscal Policy

QUICK GUIDE TO SOURCES OF GOVERNMENT REVENUE [LATEST]

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Introduction

Sources of Government revenue is a key topic to be discussed to enable us understand where and how government finance all developmental projects as well as the administrative managing of the economy or country. It is the task of government to provide essential services to the community – the maintenance of law and order, building of roads and ports, schools and hospitals and countless other activities necessary to the modern nation. But in order to provide these services, the government must be able to finance them by ensuring that there is a sufficient flow of money into its hands to enable it to pay for the work it must undertake.

Over the past decades, the financial system of central government has become increasingly complex. This is because, not only has the amount of money flowing in and out of the public treasury every year increased tremendously, but it flows in from many more different sources, and it is disbursed for very greater variety of activities.

Revenue constitutes the ordinary income of government, being composed of taxation (the major source of revenue) and earnings (charges raised by government departments for services rendered to the public, rents received for the lease of government lands or building, interest on investments by the government and so on). This is the inflow of money into the central treasury to finance expenditure.

Revenue is an increase in net worth resulting from a transaction. There are four main sources of revenue:

  • Taxes and other compulsory transfer imposed by government units
  • Property income derived from the ownership of assets
  • Sale of goods and services
  • Voluntary transfers received from other units (Grants)

Categorisation of Revenue

  1. Tax Revenue: This forms the dominant share of revenue for many government units and is composed of compulsory transfers to the government sector. Certain compulsory transfers such as fines, penalties, and most social security contributions are excluded from tax revenue. It is further re-categorised into Direct Tax and Indirect Tax.

Tax Revenue sources include the following:

a. Direct Tax:

Direct Taxes are taxes amount earned by individuals and companies, such as income tax, corporate tax and export duty. It also includes Capital Gains Tax and Gift tax.

b. Indirect Tax:

This is a tax which is not paid directly by the person who suffers or bears the burden. This type of tax is put on goods and services that are bought and consumed by individuals. They include taxes on general goods and services, excises, customs and other imports, taxes on Export and levies.

2. Non- tax revenue: All other forms of revenue apart from taxes are referred to as Non-tax revenue. Example may include grants, loans, royalties, sale of goods and services, etc.

  1. Grants are non-compulsory transfers received by government or government units from international organizations and other developed countries like United Kingdom, America, China, France, among others.
  2. Property income, sales of goods and services, fines, penalties and other revenues.

BREAKDOWN OF REVENUE SOURCES

Below are the necessary contributions as captured in the final accounts of the Consolidated Fund:

Taxes on International Transactions 17%
Value Added Tax 28%
Taxes on Personal Income 28%
Taxes on Domestic goods 13%
HIPIC 5%
Grants 5%
Non-tax Revenue 2%
Divestiture 0.0%

 

Sources of MDAs and MMDAs Revenue

In Ghana, MDAs and MMDAs sources of funds may be grouped into:

Government of Ghana Transfer:

These are transfers from the Consolidated Fund and other government units and include:

  • Central Government – Government of Ghana paid Salaries
  • Ceded Revenue
  • School Feeding Program/HIV/AIDS, etc.
  • DACF Direct transfers – capital development projects

Internally Generated Fund or Revenue:

Generation, management and utilization of IGFs are anchored on several pieces of legislation notably:

  • Articles 174 & 179 of the 1992 Republic Constitution of Ghana
  • MDA (Retention) of Funds Act, Act 753 of 2007;
  • Fees and Charges Miscellaneous Provisions Act, Act 793;
  • Fees and Charges (Amendment) Instrument of 2011; L.I 1986;
  • Part III of the Financial Administration Act, Act 654 of 2003; and
  • Part II of the Financial Administration Regulation of 2004.

IGFs

  1. Taxes on property
  2. Taxes on goods and services
  3. Property income
  4. Sales of goods and services
  5. Fines, penalties and forfeits.

Ways to improve Internally Generated Funds (IGFs) of Local Government

  1. Recruitment of quality and competent revenue staff
  2. Outsourcing of revenue allocation to competent commission collectors
  3. Setting of revenue targets for revenue collectors
  4. Proper supervision of revenue staff to prevent revenue leakages of records
  5. Rotation of revenue staff to prevent collusion
  6. Accurate data collection to ascertain improved revenue forecast
  7. Education, sensitization and demonstration to general public that revenue collected will be used judiciously for the benefit of the community.
  8. Periodic valuation and revaluation of taxable properties to ensure proper property rate collection.
  9. Motivation of revenue staff including periodic awards to induce productivity.
  10. Improving the monitoring of revenue collection

Causes of failure to meet revenue targets – sources of government revenue

1. Corruption on the part of the staff of the revenue collecting Agencies.

2. Improper records keeping by the Tax Payers

3. Lack of motivation

4. Revenue collection agencies not integrated

5. Difficulty in locating Tax Payers in the informal sector

6. Lack of logistics for tax collection

7. Lack of training or revenue collecting officers.

Sources of Government Domestic Borrowing

i. Issue of securities: – these are government borrowings through the issue of Treasury bills, Notes and Bonds on the domestic market.

ii. Commercial Banks & Financial Institutions: – these are long term loans borrowed from the domestic banking sector and non-banking sector like SSNIT.

iii. Domestic Supplier Credit: – these include the issue of letters of credit to local contractors to enable the contractors’ access credit facilities from banks. The contractors honour their obligations when the government pays them.

iv. Advances from Bank of Ghana: – these are monies advanced to the government by the Bank from their reserves. The advances are refunded when the government has sufficient revenue.

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Public Sector Accounting and Finance

STEP – BY- STEP GUIDE TO GHANA PUBLIC PROCUREMENT [UPDATED]

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Ghana Public Procurement refers to the process through which goods, services and works are financed either wholly or in part by public institutions (MDAs/MMDAs) for public purposes in Ghana.

Public Procurement is governed by an Act of Parliament called the Public Procurement Act, 2003 and led by a Board with a Chief Executive Officer and a Minister of Procurement.

Scope of Application of the Act

  • The Act applies to the procurement of goods, works and services financed in whole or in part from public funds except where the Minister decides that it is in the National interest to use a different procedure.
  • It applies to:
  • Central management agencies
  • Ministries, Departments and Agencies (MDAs)
  • Subvented agencies; these are organizations funded by government to undertake projects.
  • Government institutions
  • Public Universities, public schools, colleges and hospitals
  • Bank of Ghana
  • Among others.

Structure of the Public Procurement

The structure of the Public Procurement in Ghana is as follows:

PUBLIC PROCUREMENT BOARD

 

PROCUREMENT ENTITY (IES)

 

TENDER COMMITTEE

 

TENDER EVALUATION PANEL

 

TENDER REVIEW BOARDS

 

LOCAL GOVERNMENT

Functions of the Public Procurement Authority

The Public Procurement Authority (Board) oversees the entire Public Procurement in Ghana. Below are some of the functions of the Board:

  • Make proposal for the formulation of policies on procurement
  • Monitor and supervise public procurement in the country
  • Development of Public Procurement documents (rules, directives, instructions, other regulations)
  • Preparation and presentation to annual report on procurement
  • Government advisor on public procurement issues
  • Maintenance of public procurement entities.

What the Public Procurement Authority does not do:

  • Procure for or on behalf of any Government Entity
  • Award any contract for or on behalf of any Government Entity
  • Invite tenders for or on behalf of any Government Entity

Expenses of the Board; Parliament through appropriation grants the Board with such money as it may require.

Accounts and Audit; The Board shall keep records and prepare annual accounts as prescribed by the Controller and Accountant General and approved by the Auditor General.

Procurement Entity:

A Procurement entity is responsible for procurement of goods, services and works.

The Minister may in consultation with the Board by notice in the Gazette declare any entity or individual to be a procurement entity and shall carry out its duties as laid down in this Act or by the Board.

Tender Committee:

Each Procurement Entity shall have a Tender Committee that will be responsible for:

  • Ensuring that each stage of the Procurement activities in this Act and recommended by the Board.
  • Ensuring that the Procurement Entities exercise sound judgment in making procurement decisions
  • Referring to appropriate Tender Review Board for approval beyond its authority.

Tender Evaluation Panel

  • This Panel has the expertise to evaluate tenders and assess the Tender Committee in its work.
  • They shall evaluate each tender according to the pre-determined and publish evaluation criteria.

Tender Review Boards (TRB)

At each level of the Procurement process, the TPB is established;

  • Central TRB
  • Ministerial TRB
  • Regional TRB
  • District TRB

NOTE: The Public Procurement (Amendment) Act 2016 (Act 914) has brought dissolution of District and Ministerial for TRB.

Functions

  • Approval of the Procurement process by the Procurement Entity
  • Furnish the Procurement Board with annual report
  • Participate in Public Procurement forums
  • Review the decisions of heads of entities in respect of a complaints.

The procurement process.

Ghana Public Procurement process that Procurement Entities follow in making procurement decisions for government entities can be summarized as follows:

Procurement Plan

A Procurement Entity prepares a Procurement Plan and submits its approved programmes and plan for approval by the Tender Committee and shall indicate:

  • Contract packages
  • Estimated cost for each contract packages
  • The procurement methods
  • Processing steps and time
  • Among others

Qualification of Tenderers

A tenderer in Public Procurement shall

  1. Possess the necessary
  • Professional and technical qualifications and competences
  • Financial resources
  • Equipment and other physical facilities
  1. Have the legal capacity to enter the contract
  2. Be solvent; not bankrupt
  3. Pay taxes
  4. Directors of the tenders are qualified and not declared bankrupt or illegal behavior
  5. Pay Social Security Fund and pay all compensation for pollution if any.

Pre – qualification Procurement

A Procurement Entity may engage in pre- qualification proceeding to identify tenderer who are qualified prior to the submission of tenders.

Rejection of tenders, proposals and quotations

A Procurement Entity may reject any tender when the tenderer fails to meet a qualification in the predetermined or published requirement. The grounds for rejections shall be communicated to the Tenderers.

  1. Methods of Procurement
  2. Competitive Tendering:

This method of procurement is used by the Procurement Entity when it has the specific/formulate detailed speculations for the goods and gives all tenders equal opportunities.

  1. Two – Stage Tendering:

This method is used when the Procurement Entity does not have specific specifications for the goods or services. The first stage gives tenderer opportunity to furnish the Procurement Entity with likely specifications which will meet the needs of the Procurement Entity and after that, the second stage is where each tenderer is given opportunity for bid for the contract.

  • First stage (Invitation Document)
  • Second stage (Tender proceedings)

Restricted Tendering

A Procurement Entity may for reasons of economy and efficiency and subject to the approval of the Board engage in procurement by means of Restricted Tendering.

Condition:

  • If the goods, services or works are available from only limited number of suppliers or contractor.
  • If the time and cost required to examine and evaluate a large number of tenders.
  1. Single – Source Procurement

A Procurement Entity may engaged in this method under section 41 with the approval of the Board.

Conditions:

  • Where goods, works or service are only available from a particular supplier or contractor.
  • Where there is an urgent need for the goods, works and services
  • Where there is an additional requirement from a supplier or contractor who has supplied the Procurement Entity with goods, services or works.
  • Where the Procurement Entity thinks in the best interest of National security a Single – Source Procurement method is used.

Tendering Procedures

  1. National Competitive Tendering:

This is where the Procurement Entity decides that only domestic suppliers or contractors may submit tenderers.

2. International Competitive Tendering:

This is where the Procurement Entity decides to allow foreign firms or tenderers to tender or bid for the contract.

Procedure for Inviting Tenders

A Procurement Entity shall invite tenderers by publishing a document called Invitation to Tender in the newspaper. If it’s an International Competitive Tendering, the document must also be published in at least one International newspapers.

Contents of Invitation to Tender

  • Name and address of the Procurement Entity
  • Specification of goods and place of delivery
  • Time of delivery
  • Criteria and procedure for evaluation
  • Means of obtaining the Invitation of Document
  • The price and currency as well as means of payment for the Invitation Document
  • The place and deadlines for submission of Tenders
  • The place, time and date for the opening of bids.

Clarification and Modification of Tender documents

  • A supplier may request promptly clarification of the tender documents from the Procurement Entity. The Procurement Entity shall within reasonable time before the deadline for the submission of Tender respond to the request.
  • The Procurement Entity may modify the Invitation Document by issuing an addendum (textual matter added onto the publication) prior to the deadline for the submission of tender.

Examination of Tenders

The Procurement Entity may ask a supplier or contractor for clarification of its tender in order to assist in the examination, evaluation and comparison of tenders.

Evaluation of Tenders

  • The Procurement Entity shall evaluate and ascertain the successful tender in accordance with the procedures and criteria set out in the Invitation Document.
  • Upon choosing the successful tenderer, the necessary documents are assigned and come into effect.

Methods and Procedures to Procure Consultants.

It follows the same procedures as under goods.

Review

Right to Review:

Any supplier that claims to have suffered any loss or injury due to a breach of a duty imposed on the Procurement Entity by this Act on;

  • The selection of a method of procurement
  • The choice of a selection procedure
  • The limitation of procurement proceedings
  • The decisions by the Procurement Entity.

Review by Procurement Entity

A complaint shall in writing be submitted to the head of the Procurement Entity either before the or after the procurement contract comes into force. The Procurement Entity shall within 21 days after the submission of the complaint, issue a written decision concerning the complaint.

Administrative Review

If a supplier lodges complaints to the Procurement Entity and the Procurement Entity’s response/decision doesn’t suit the supplier, an official complaint is sent to the Public Procurement Authority (PPA).

  • Upon the receipt of a complaint, the authority shall give notice of the complaint promptly to the Procurement Entity.

The decision by the Authority may be either;

  • Declare the legal rules/principles that govern the subject – matter of the complaint
  • Annul in whole or in part an illegal act or decision of the Procurement Entity.
  • Revise an illegal decision by the Procurement Entity or substitute its own decision for the decision of the Procurement Entity.
  • Order that the procurement proceeding be terminated.

Disposal of stores, Plant and Equipment

Authority to dispose

  • The head of a Procurement Entity shall convene a Board of Survey comprising representatives of departments with surplus, unserviceable and absolute stores and Plant & Equipment.
  • The Board of Survey recommendations is approved by the head of the Procurement Entity as to how to dispose the stores.
  1. Procedures for Disposal
  • Transfer to government departments
  • Sale by public tender to the highest tenderers
  • Sale by public auction
  • Destruction, dumping or burring as appropriate.

Procedures for Procurement at the District Assembly Level (Local Government)

  • The storekeeper or head of spending units raises requisition by completing the Activity and Expenditure Initiation forms which is approved by the Heads of MDAs/MMDAs/Administration.
  • Procurement Officer makes requests for quotation by inviting bids from potential surplus.
  • Tender Committee reviews the bids and selects a supplier.
  • The Procurement Officer prepare the Purchase Order and sent to the Accountant to ensure that the transaction is properly charged and to commit the transaction against the Budget Allocation (Warrant) of the MMDAs.
  • The accountant authorizes the Purchase Order and approve by the Head of the MDAs and MMDAs as a warrant
  • The Purchase Order is sent to the supplier, goods is received and inspected by storekeeper and the Audit team.

WEAKNESSES OF THE PUBLIC PROCUREMENT IN GHANA

The procurement Act of Ghana, Act 663 (2003), was enacted and promulgated by parliament of the republic of Ghana to, among other things; bring sanity and conformity to public procurement by instituting bodies and principles that harmonizes the public procurement process and activities.

Even though the Act is good, it has some disadvantages which may include the following:

  1. Lack of Clear Procedure for Emergency Procurement
  2. Slow Pace in Regularizing the Draft Regulations
  3. Lack of Qualified Procurement Personnel
  4. High Cost of Advertisement

Public Procurement Authority, OECD Principles

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Public Sector Accounting and Finance

A COMPREHENSIVE GUIDE TO PUBLIC SECTOR ACCOUNTING

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Definition of Terms

Public Sector Accounting (ACC 310), introduced the simplest definition of ‘Public Sector’ is “all organisations which are not privately owned and operated, but which are established, run and financed by Government on behalf of the public.”

R A Adams (2004) in his book “Public Sector Accounting and Finance Made Simple” defines Public Sector Accounting as “a process of recording, communicating, summarizing, analysing and interpreting Government financial statements and statistics in aggregate and details; it is concerned with the receipts, custody and disbursement and rendering of stewardship on public funds entrusted”.

Government refers to the collection of public institutions established and given the authority to run the affairs of a country. It is a system of governance and includes the body of individuals who are authorised to administer the laws of a Nation.

Government Accounting refers to all the financial documents and records of public institutions that relate to the collection of tax payers‟ money, and the analysis, control of expenditure, administration of trust funds, management of government stores and all the financial responsibilities and duties of the relevant organs.

Government accounting includes the process of recording, analysing, classifying, summarising, communicating and interpreting financial information about Government in aggregate and in details, recording all transactions involving the receipt, transfer and disposition of public funds and property. The processes of Government Accounting are further discussed as follows:

(a) Recording: Recording involves the process of documenting the financial transactions and activities in the necessary books of accounts are cash book, ledger and vote book.

(b) Analysing: Analysing involves the process of separating transactions according to their distinct nature and posting them under appropriate heads and sub-heads.

(c) Classifying : Classifying has to do with the grouping of the transactions into revenue and expense descriptions and bringing them under major classes as ‘Revenue Head’ and ‘Sub-heads’, with their relevant code numbers of accounts.

(d) Summarising: Summarising concerns the bringing together of all the classes of accounts and preparing them into reports periodically as are statutorily or organisationally required.

(e) Communicating: Communicating is about making available financial reports on all the government financial activities from the necessary accounting summaries to various interested parties. The style of communication adopted should be un-ambiguous, lucid and devoid of jargons as much as possible.

(f) Interpreting: Interpreting ends the process by giving explanations on what has been reported in the various financial statements and reports, as regards the overall operations and performance of the relevant government organisation(s). This is to enable the necessary parties and users to take relevant decisions based on their assessments of the reports.

1.2. Public Sector Organisations Exist For The Following Reasons:

(i) To provide public goods and services to individuals and institutional consumers regardless of their ability to pay

(ii) To provide good and services whose investment capital is quite high and hence cannot be provided by the private sector or whose returns are low and therefore unattractive to the private sector, though necessary

(iii) To achieve a net social benefit rather than net profit so as to enhance equity of access to meeting needs of water, electricity, food, shelter, transport, health and communication, etc.

(iv) To correct inequalities which exist among various social classes and communities

(v) To influence future social, political, economic or financial environment for optimal growth of the economy.

Types of Public Sector Organizations

Public sector organizations may exist at any of four levels:

  • International (multistate entities or partnerships)
  • National (an independent state)
  • Regional (a province/state within a national state)
  • Local (a municipal-level body such as a metropolis, municipality or district)

At any of these levels, the public sector generally consists of at least three types of organizations:

Central government consists of a governing body with a defined territorial authority.

Central government includes all departments, ministries, and agencies of the government that are integral parts of the structure, and are accountable to and report directly to the central authority — the legislature, council, cabinet, or executive head.

Boards, Authorities, & Commissions consist of public organizations that are clearly part of the government and deliver public programs, goods, or services, but that exist as separate organizations in their own right — possibly as legal entities — and operate with a partial degree of operational independence. They often, but not necessarily, are headed by a board of directors, commission, or other appointed body. Examples are Electoral commission, Mineral commission, Ghana Atomic Agency Commission, etc.

Local government: This is made up of the local authorities such as Metropolitan assemblies, Municipal Assemblies and District Assemblies.

Ways by Which Government Control Public Companies
  1. Government powers can be exercised through the appointment of Chief Executives and members of Boards of management
  2. Government can exercise control by giving specific directions concerning prices production costs and social goals.
  3. Government uses the submission of annual reports as an opportunity to evaluate the performance of enterprises
  4. Public companies need to obtain government approvals and guarantees for long term loans
  5. Public companies need to obtain government approval for their annual budgets.
  6. Government may specify the economic roles of state enterprises and the target rates of their return.
Nature and Objectives of Government Accounting

The objectives of Government accounting include the following:

(a) To fulfil legal requirement: The law requires that government accounts are prepared and audited annually.

(b) To perform the stewardship function: The ruling government is the steward of the resources and finances of the Nation. Government has to give account of how these finances are used.

(c) To enable Government to plan well the future activities and programmes of the Nation.

(d) To provide a process of controlling the use of the financial and other resources.

(e) To provide the means by which actual performance may be compared with the target set.

(f) To evaluate the economy, efficiency and effectiveness with which governance is carried out.

Purpose of Public Sector Accounting

The purposes of Public Sector Accounting include:

1. Demonstrating the proprietary of transactions and their conformity with the law, established rules and regulations.

2. Measuring current performance.

3. Providing useful information for the efficient control and effective management of government operations.

4. Facilitating audit exercise to be carried out.

5. Planning future operations.

6. Appraising those in the authority, in efficiency and effectiveness

OBJECTIVES OF PUBLIC SECTOR ACCOUNTING

The main purposes of Public Sector Accounting are:

(a) Ascertaining the legitimacy of transactions and their compliance with the established norms, regulations and statutes.

(b) Providing evidence of stewardship.

(c) Assisting planning and control.

(d) Assisting objective and timely reporting.

(e) Providing the basis for decision-making.

(f) Enhancing the appraisal of the efficiency of management.

(g) Highlighting the various sources of revenue receivable and the expenditure to be incurred.

(h) Identifying the sources of funding capital projects.

(i) Evaluating the economy, efficiency and effectiveness with which Public Sector Organisations pursue their goals and objectives.

(j) Ensuring that costs are matched by at least equivalent benefits accruing therefrom.

(k) Providing the details of outstanding long-term commitments and financial obligations.

(I) Providing the means by which actual performance may be compared with the target set.

(m) Proffering solutions to the various bottlenecks and/or problems identified.

Types of Information Produced by Public Sector Organizations

The information produced by public sector organizations is by no means static. The information has been limited only to the needs of the user. In general, we may categorize the different types of information generated by public sector organizations as:

Statutory information: These are mandatory information that public sector organizations are required to produce by virtue of laws the established them.

The Financial Administration Regulations (FAR) compels Ministries, Departments, and

Agencies (MDAs) to produce monthly, quarterly and annual report of their finances and operations.

  1. Financing information: These are information demanded by donors and other funding agencies to be produced by public sector organization according to a stipulated format.

This information focuses accountability, performance evaluation, and objectivity on public interest of the programmes.

  1. Planning information: Planning by spending agencies in Ghana is based on a medium term expenditure framework (MTEF) which operates on cash basis normally for a period of three years. All spending agencies are expected to prepare their budgets on this planning model and report on the progress of their planning, programming and budgeting schemes.
  2. Budgetary information: Budgetary information relates to the utilization of budgets as instruments of national economic management, communicating the resource constraints to spending departments, reducing gaps between planned and actual expenditures and achieving better control of public expenditures.
  3. Control information: Central control and monitoring of expenditure during a year is done by the treasury which provides regular reports on what has been spent and the estimated outturn of the year. Information for monitoring comes each month from the records of receipts and payments to the Consolidated Fund maintained by the treasury.

Control is exercised through cash limits that provide a system of government control of expenditure during the financial year.

    1. Users of Public Sector Accounting Financial Information
Users Information Needs
Donor Community Whether organizational objects are pursued, and plans and targets are attainable
Media How Government financial information impacts on all aspects of society
Economic Planners Whether Government financial information are adequate and received timely for planning purposes
Taxpayers The consequences of Government spending, whether they will result in improvements in their living standards and/or increase taxation or inflation
Bankers and Lenders to Government The financial position of government especially its ability to pay loans and interest thereon and Governments ability to borrow money.
Regulatory bodies Whether Government spending meets legal requirements and whether financial controls are adhered to by spending agencies
Governments Economic Monitoring Authorities Whether there is deficit or surplus on current accounts the quantum, and whether to borrow or mop up liquidity in the economy
Budget Analysts, Managerial Accountants and Investors The trends of current monthly accounts and historical costs to help predict the future financial and economic position of the economy.
Revenue and other Finance related Agencies of Government Monitor financial position of government as a basis for structuring managerial and employees rewards system, such as bonuses for staff
Controller and Accountant-General Uses financial reports to develop and maintain a management information system, capturing real time, the past, present and emerging development and behaviour patterns of various Government organizations.
Auditor-General Whether Government accounts have been properly kept and records properly reported on
The Government Trade Unions Require financial information to be used in salary negotiations.
Contractors and suppliers of goods Are there enough money to pay for Government contracts?
Non-Governmental Organisations Want to know key areas of the state that require social or economic intervention
The World bank, IMF, Multilateral and Bilateral Agencies and Foreign Governments Wants to know the financial and economic performance of the country, where to assist, where to advice. They want to assess the effectiveness of spending on HIPC and Poverty Alleviation, the sustainability of Fiscal Policies, net debt, net wealth, contingent claims against the Government and obligations for government pensions.
Private Sector Business Whether Government borrowing from the commercial banks would affect their business, and whether they can do business with the Government?
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Public Sector Accounting and FinanceTaxation and Fiscal Policy

CAPITAL GAIN TAX

capital-gains-tax-1

CAPITAL GAIN TAX

 Capital gain tax refers to the profit realized on the sale of a non-inventory asset that was greater than the amount realized on the sale. The most common capital gains are realized from the sale of stocks, bonds, precious metals and property.

The Gift Tax and Capital Gains Tax laws formerly existed separately from the income Tax Decree, 1975 (S.M.C.D.5) but have now been incorporated in the Internal Revenue Act, 2000 (Act 592) with effect from the year 2001.

This arrangement is to make Act 592 handy and also to avoid tedious cross references and waste of time. During the exercise, it was felt that certain tax provisions were common in their application to all the three tax legislation namely, income tax, gift tax and capital gains tax. These are the provisions relating generally to Returns and Assessments. It was also felt that to repeat these provisions in details under each tax type will make Act 592 quite bulky to handle pharmacieinde.fr.

It was therefore decided to provide a linkage in the form of one provision or section that will enable the commissioner to make the provisions relating to returns and assessments in the assessment of income tax also applicable to tax on gifts and capital gains.

Returns: Every person subject to tax under Act 592 has to make a return unless specifically exempted. The provisions under Returns in Act 592 for income tax purposes are exhaustive and can therefore be applied to both gift tax and capital gains tax with necessary modifications.

Assessments: The commissioner is empowered to make provisional, additional and final assessments. He is also empowered to specify certain persons in the Gazette or print media to make self – assessments. These provisions are also very exhaustive and can be made to apply to persons chargeable to tax relating to gifts and capital gains with necessary modifications.

General: This linkage to returns and assessments for income tax purposes also provides a consequential linkage to dispute resolution, collection of tax and compliance for gift tax and capital gains tax.

 

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Public Sector Accounting and FinanceTaxation and Fiscal Policy

TAX ASSESSMENT SYSTEMS

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TAX ASSESSMENT SYSTEMS

 Tax assessment systems refers to the mechanisms used in the determination of the chargeable income tax by an individual or a company or an institution.

Currently, the two systems in operation are:

  1. Provisional Assessments and
  2. Self Assessments

Provisional Assessments:

 This type of assessment is raised by the Commissioner – General as soon as may be after the commencement of each basis period of a person who pays tax by instalments. It is computed according to the best judgment of the Commissioner – General.

 

The provisional assessment would provide the following details:

 

  1. The estimated chargeable income;
  2. The estimated tax to be paid;
  3. The amount and timing of tax installments to be paid and
  4. The time, place and manner of objecting to the assessment

Taxpayer is to pay 30% deposit of the provisional assessment on objection.

 

Self Assessment:

 As the name suggests, the taxpayer makes his own estimate of chargeable income and tax payable thereon for a year of assessment. This is only done under the authority of the Commissioner – General in a notice published in the Gazette or in the print media. This assessment is done on or before the commencement of the basis period. The taxpayer has the right to revise his own estimates giving reasons for such a revision. The self – assessment or the revised self – assessment shall be deemed to be as assessment by the commissioner.

Comparisons:

 In the main, both are provisional assessments except that the Commissioner – General prepares one while the taxpayer prepares his own self – assessment. In the case of the provisional assessment raised by the Commissioner – General, the taxpayer may object within 9 months in writing stating the grounds of his objection and also provide an estimate of his chargeable income.

In the case of a self- assessment the taxpayer cannot raise an objection against his own assessment but he is permitted to revise his estimates providing reasons for his revision. Again, in the case of self – assessment, where the estimate or revised estimate of chargeable income for a year of assessment is less than 90% of the taxpayer’s actual chargeable income assessed for the year, the taxpayer shall be liable to a penalty equal to 30% of the difference between the tax calculated in respect of that person’s estimate or revised estimate of chargeable income and the tax calculated in respect of 90% of that person’s actual chargeable income for the year.

This does not apply to provisional assessments raised by the Commissioner – General. Self – assessment demands proper record keeping enabling the taxpayer to prepare accurate estimates. Failure to prepare accurate estimates will results in penalties being imposed.

 

 

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