Historical cost is the consideration given to acquire or develop an asset, which is the cash or cash equivalents or the value of the other consideration given, at the time of its acquisition or development. Historical fairly reflects the:

• Cost of service by providing information on the amount of the resources expended to acquire or develop assets consumed in the provision of services.
• Operational capacity through information on the resources available to provide services in future periods based on their acquisition cost.
• Financial capacity by providing information on the amount of assets that may be used as effective security against borrowing.

Market value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction. Vehicle is traded in the open, active and orderly markets so obtaining the market value is practicable. Market value fairly reflects the:

• Cost of service by allocating the cost of assets to reflect their consumption in the current reporting period based on current market values of the vehicles.
• Operational capacity by providing information on the market value of assets held to provide services in the future periods.
• Financial capacity by providing information on the amount that would be received on the sale of the assets.

Replacement cost is the measurement basis that fairly reflect the cost of service, operational capacity and financial capacity of the library books. Replacement cost is the most economic cost required for the entity to replace the service potential of an asset at the reporting date. The use of replacement cost fairly reflects the:

• Cost of service to be equivalent to the amount of sacrifice of service potential incurred by that use.
• Operational capacity by the resources available to provide services in future periods, a sit focused on the current value of the assets and its service potential to the entity.
• Financial capacity is not reflected by replacement cost basis as it does not provide information on the amounts that would be received on sale of asset.

GPFR are financial reports prepared primarily to respond to the information of users who do not possess the authority to require a public entity to disclose the information they need for accountability and decision-making purposes. GPFR must be prepared in compliance with the IPSAS. On the other hand SPFR are those reports prepared to respond to the information requirements of the users that have authority to require the preparation of financial reports that disclose the information they need for their particular purpose. SPFR are prepared in compliance with the requirement of the user and need not to comply with IPSAS.

i) Motor vehicle donated to the entity
Under cash basis no cash is received and therefore no recognition will be made in the Statement of cash receipt and cash payment for the period. No information to reflect the operational capacity of the entity (Motor vehicle will not be reflected in the financial information).
Contrary, under the accrual basis of accounting the policy will be to recognize the donation in kind as revenue for the reporting period and disclose the vehicle at its market value. In addition, the cost of service will reflect the use of the vehicle (depreciation) within the reporting period and reporting the operational capacity at carrying amount.

ii) Revenue earned but not received by the entity
Under cash basis, there will be no disclosed of the revenue in the statement of cash receipt and cash payment since such revenues were not received. However, information on the revenue receivable may be disclosed in the notes to the accounts. No allowance will be made for uncollectible revenues.

Under accrual basis, the accounting policy will be to recognize the revenue yet to be received as revenue for the period and treat the revenue receivable in the statement of financial position as asset. In addition, appropriate allowance will be made for uncollectible revenues to reflect the cost of service. No disclosure is required under

iii) Furniture acquired in the current year
Cash basis accounting policy is to charge the whole amount of the furniture to cost of service (payments) for the year without disclosing the value of the asset in the operational capacity. Consequently, no depreciation policy is required.

Under accrual basis, the furniture will be capitalized and depreciated over its useful life so as to fairly reflect the cost of service of the entity. The depreciation policy will be disclosed in the notes to the accounts, a part of accounting policies.

iv) Electricity consumed for the year but not paid to PDS
Electricity unpaid at the end of the year will not be included in the statement of cash receipt and cash payments for the period. No liability will be reflected in the financing capacity of the entity. Notwithstanding, the liability resulting from the electricity may be reported in the notes of accounts if it is material.

However, under the accrual accounting policy, the electricity expense will be reflected in the cost of service and the financial capacity will also indicate the liability. No disclosure is required in the notes of accounts

i) Observation
The issue borders on error in presentation and omission of information unknowingly. The case related to faithful representation. Faithful representation is attained when the information about the economic and other phenomena represents what it purports to represent.

The error and omission revealed in the in the financial report undermines the faithful representation of the information contained therein.

ii) Observation
The fact of the case is that a budget information was included in the GPFR. The qualitative characteristics that will be affected is comparability and relevance.
Comparability is the quality of information that enables users to identify simplifies and differences between two sets of phenomena. Relevance is achieved if information provided is capable of making a difference in achieving the objectives of financial reporting and this occurs when the information has confirmatory value and predictive value.

In this case, the disclosure of budget information in comparison with the actual outcomes will enhance comparability of the information thereby increasing its usefulness to the users. In addition, the inclusion of budget information will make the information relevant by enhancing its confirmatory and predictive value.

iii) Observation
Here an asset, investment reported in the financial statement is not support with relevant documents. This will affect the verifiability of the financial information. Verifiability is the quality of information that helps assure users that information in the GPFR faithfully represents the economic and other phenomenon that it purports to represent.

In this case, the absence of supporting document to the investment undermines the verifiability of the information hence decreases the usefulness of the information to the users.

iv) Observation
The 2018 financial report was issued in June 2019, six months after end of year. The 2017 finnacial report was issued in September 2018, 9 months after year end. There is improvement over 2017 but the issue here is about timeliness of the information. Timeliness means having the information available for users before it loses its capacity to be useful for accountability and decision-making purposes. Under the Public Financial Management Act 2016 Act 921, a covered entity is required to issue its report two months after the end of the year, that is, by February every year. In the case reported, the financial report of the entity cannot be said to be timely.
Lack of timeliness can render information less useful.

(Each well explained point @ 1.25 marks each = 5 marks)

• Aggregated and disaggregated expenditure control;
• improve treasury system and budget control
• eliminate redundancies and integrate data to ensure better financial control and information systems
• improve efficiency and reduce cost of operation
• improve strategic and day-to-day decision making
• quick availability of the data or MIS, effective control
• allow better cash flow management and budget control
• ensure adequate control to minimize risk of fraud and malpractices
• provide better interface with Bank of Ghana, Commercial Banks and the Controller and Accountant General
• debt as well as grant tracking from various agencies to the State
• predictability for financial flows;
• expenditure and investment planning;
• ability to monitor expenditures;
• fiscal budget management control;
• timely management, financial and statutory reporting; and
• accountability and transparency over Government of Ghana and Donor revenues and expenditure.

(Any 5 points @ 1 marks each = 5 marks)

Subject to the Constitution, Parliament shall provide oversight in respect of

• matters relating to budget and finance;
• government expenditure;
• performance reporting;
• post-legislative scrutiny; and
• impact of financial policy measures on the economy.

Responsibilities of section Controller and Accountant General. 8(4) of Act 921
The Controller and Accountant-General shall;

• compile and manage the accounts prepared in relation to public funds;
• issue general instructions to a Principal Spending Officer in accordance with this Act and the Regulations;
• keep, render and publish statements on public accounts under this Act;
• develop efficient accounting systems for a covered entity;
• approve accounting instructions of a covered entity;
• receive, disburse and provide secure custody for public funds;
• on the instructions of the Minister, open an account with the Bank of Ghana and its agents necessary for the deposit of public funds subject to compliance with the Treasury
• Single Account system established under section 46;
• authorize the opening of an account for a covered entity;
• in consultation with the Auditor-General, specify for a covered entity, the accounting standards, policies and the classification system to be applied in public accounting to ensure that a proper system of accounting operates;
• provide accounting officers to covered entities; and be responsible for the classification and management of value books

(Any 5 points @ 1 mark each = 5 marks)

This model is when the public authority contracts with a Private Partner to operate and maintain a publicly owned facility or infrastructure. The private sector is partially involved, for example it provides a service or manages the operation. Services or management contracts allow the private sector to provide infrastructure related service for specified periods of time.

The initial worn-out asset is provided by the public agency requiring the private partner to invest in revamping the asset and allowed to operate it for a specified period and residual asset transfer to the consolidated fund.

Service concession arrangements involve contracts under which a public sector entity (‘grantor’) grants a private entity (‘operator’) the right to operate the grantor’s infrastructure (e.g., an airport, toll road, bridge, hospital, power distribution). The infrastructure may already exist or may be constructed by the operator. The concession arrangement may also require significant upgrades to the infrastructure without any equity right to the operator. The operator is allowed to recoup its investment over a specified contract period and return the residual asset to the grantor (government).

This takes place when the private and public sectors jointly finance, own and operate a facility.

Public sector entities are generally required to apply the Public Procurement Act 2016 to their procurement activities. However, the Public Procurement Act has allowed the use of commercial practices under certain conditions. The conditions under which a public sector entity can use commercial practices are that:

• The entity is legally and financially autonomous and operates under commercial law
• It is beyond contention that public procurement practices are not suitable, given the strategic nature of the procurement.
• The proposed procurement method will ensure value for money, provide competition and transparency to the extent possible.

For an entity to apply the commercial practices of procurement, they must seek the approval of the Governing Board of the Procurement Authority. Board approval to use commercial method must be published in a gazette.

The hospital is not legally and financially autonomous and does not operates under commercial laws. The hospital is established under the Ministry of Health and Ghana Health Services therefore cannot be said to be autonomous legally and financially.

It will be a tough order to justify that the public procurement practices are not suitable for a public hospital like ours. Similar, the value for money argument for using the commercial practices will be difficult.

In my opinion base on the above analysis, the hospital does not qualify to apply for approval to use the commercial practices for procurement. I suggest, the public procurement practices should be made more efficient in the hospital.

• Ensure compliance to the Act 914 and concurrent approval from a tender review committee does not absolve the accountability of the head for contracts made.
• Establish procurement unit within entity staffed with qualified personnel.
• Empanel competent and qualified evaluation panels
• Ensure that procurement procedures are followed (due process)
• Ensure stores, vehicles and equipment are disposed of according to the Act
• Exercise sound judgement in making procurement decisions
• Seek concurrent approval from the tender review committee when threshold is exceeded.
• Facilitate contract administration and ensure compliance to contract reporting requirements

(Any 3 points @ 1 mark each = 3 marks)

REPORT ON FINANCIAL PERFORMANCE OF CONSOLIDATED FUND FOR THE YEAR ENDED 31ST DECEMBER 2018

Introduction
The report provides an analysis and discussion of the financial performance of the Consolidated Fund in line with the Recommended Practice Guide (RPG). The analysis and discussions are based on the common size statement of Revenue and Expenditure of the Fund for the period.

Revenue Performance
The Fund performance in terms of direct taxes and non-tax revenues exceeded the previous year’s results and that of the budget for the period. Direct tax revenue constituted 34.7% of the total revenue of the year as against 27.1% and 31.9% of the prior year and budget totals respectively. This may be attributed to massive tax education and technology applications introduced in to the tax administration system during the period. However indirect taxes performed below the budget and prior year performance likely due to sharp economic decline caused by external factors. Grants has also seen a downward trend over the period, indicating that donor support is decreasing over the years.

Expenditure performance
Compensation of employees remain the biggest expenditure of the fund for the year with over 60% of the total revenue generated spent on it. This exceed the expenditure level of 2017 and even the budget of the year. The fund was expected to spend 40.9% of total revenues of the year on compensation but ended spending 62.8% on it, showing clearly a budget over run in excess of 29%. This may result from employment without establishment warrants or increase in wage due the labour unrest during the period. There is a budget under run in goods and services during the year. The fund budgeted to spend about 28% on goods and services during the year but spent only 21,7% during the year. This may affect efficient delivery of public services as input are likely to be lacking due to failure to release budget allocation to the departments. Interestingly, over 41% of total revenue was spent on interest expense, far in excess of the budgeted proportion of 26.5%. This results from huge public debt during the period. Governments should ensure that debt levels are controlled so as to create fiscal space for spending on goods and services.

Conclusion
The net operating result of the Fund was deficit 32% compared to deficit 12% in 2017 and budget deficit of 2.8%. This shows that financial performance of the Fund was not good enough. Drastic measures should be taken to increase revenues from indirect revenues sources and to reduce spending on compensation of employees and interest on debt.

(6 marks)