BUDGETING IN THE PUBLIC SECTOR

ASSURANCE PROFESSIONAL SCHOOL
PUBLIC SECTOR ACCOUNTING & FINANCE: PUBLIC SECTOR BUDGETING
Budget
Budget – A budget is the expression or list of planned revenue and expenditure for a given
period. In Ghana the given period is a financial year. Government Budgeting tends to
include projected estimates of expenditure that are comprised of costs or expenses for
salaries and procuring goods, services and assets and planned revenue or Non Tax Revenue
(NTR), Internally Generated Funds (IGF) and grants. A budget may be considered a
management tool that helps MDAs and MMDAs allocate resources to achieve strategic
objectives in measurable terms.
Budgets instill a sense of accountability as they allow the people to know how well or not
so well an organization is performing.
According to the International Public Financial Management Handbook, a budget,

as a policy document, accomplishes the following:
 It represents the government’s financial plan for resourcing those activities designed to
deliver chosen policies in a particular budget period
 It attempts to show how much the activities will cost and how the government intends to
finance them;
 It shows what the government actually did, who paid for it and in what form (through taxes,
user fees, donor assistance or government borrowing)
 It reallocates resources and tries to reduce inequalities in income and wealth by imposing
taxes and redistributing resources to the vulnerable
 It tries to promote economic stability
 It tries to promote economic growth.
Features of Public Sector Budget

a) Annuality; Public sector budget is prepared to cover a period of time usually one year.
b) Comprehensiveness; comprehensive to the extent that it holds authority for every
government action within the year.
c) It is a legal document binding on the executive arm of government
d) Public sector budget may be supplemented by a review budget.
e) Public sector budget is driven by the national interest rather than profit motive.
f) Public accountability; it is a legal document through which the citizens can hold
government accountable
Objectives of government budgeting

Governmental budgets have three main objectives:
1. Managerial Productivity: MP
2. Financial Control: FC
3. Goal Attainment: GA
Terminologies associated with government budgeting

a) Budget Appropriation – The Budget Appropriation is a law passed by Parliament that
specifies how much money can be spent on any given MDA program.
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b) Budget Ceiling – A budget Ceiling is an important component of MTEF and budget

planning. A budget ceiling lets a MDA or MMDA know its aggregate resource constraint
or amount of resources over a designated amount of time that may be used to achieve
strategic or service delivery objectives. Budget ceilings require organizations to prioritize
what they plan to achieve, and they play a critical role in helping MDAs and MMDAs
decide where to find fiscal space to fund new policy priorities.
c) Budget Classification – Budget classification in Ghana expects MDAs to classify their
budgets according to economic and functional classifications. The economic classification
identifies the type of expenditure for salaries, goods and services, transfers and capital
payments. The functional classifications categorize expenditures according to the purpose
and objectives regardless of the MDA
d) Budget preparation Guidelines – Budget Guidelines seek to provide clear instructions
about the processes and procedures MDAs and MMDAs should use to prepare their budget
proposals and budget estimates.
e) Budget Program – a budget program is a main section within an MDA’s budget that funds
clearly defined sets of services that deliver one or more of the core functions contained in
the MDA’s legislated and assigned mandates.
f) Budget Sub-Program – A budget sub-program comprises a distinct grouping of services
and activities that fall within the framework of a budget program
g) Budget and Economic Policy Statement – The Budget Statement is presented by the
Minister of Finance to Parliament each year. The statement sets economic policy and sector
performance for the upcoming financial year. It explains how GOG plans to confront
economic and PFM challenges for the upcoming year, and it discusses the macroeconomic
framework for the nation.
h) Budget calendar- MOF issues in February a Budget Preparation Calendar for the ensuring
year’s calendar. The Calendar outlines the steps required for the effective coordination of
formulating the budget.
Functions and uses of a budget

 Planning. Budgets are embodiment of plans of an organisation and helps organisation to
stick to their plans in a systematic manner.
 Control. Budgets serve as a tool of control of government activities and programmes. It
provides the benchmark or standards by which activities could be controlled.
 Coordination. Budgets help to achieve goal congruence by bringing the plans and
objectives of subunits of government together to ensure that national goals and objectives
are achieved.
 Communication. Budgets serve as a formal communication between government and the
public concerning the intention of government.
 Performance measurement. Budgets provide key performance indicators or standards by
which performance of entities and administrators could be assessed
 Motivation. A budget produced from a participatory process serve as a drive to managers
and employees to achieve the overall goal of the entity.
 Accountability and transparency. Budget serve as tool of accountability as it establishes
responsibility and authority for executing the plans of the organisation. It also ensures

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transparency in the allocation of resources to the various sectors and projects of

government.
Limitation/challenges of Budgeting
Budget is very important in public financial management however it has the following
limitations:
 Costly in terms of time and financial resources.
 Influenced by economic instability. In terms of rising inflation the budget is rendered
irrelevant for controlling
 Behavioral effect in that the authorization of an amount may be misapplied.
 Budgets does not allow for flexibility in decision making as compliance is a must.
 Budget can easy become an end rather than the means to an end.
PFM LEGAL FRAMEWORK FOR PLANNING AND BUDGETING IN GHANA

 Ghana’s PFM legal framework is based on the Constitution and acts and regulations that
establish appropriate budget and accountability structures and reporting arrangements.
 Clear rules and procedures are in place, and there is a clear delegation of budget roles and
responsibilities for Parliament, MOF, MDAs, MMDAs, CAGD, GAS, GRA and BOG.
 Expenditure controls are established, and rules governing what IGF MDAs and MMDAs
may retain are spelled out in relevant acts and regulations.
 Parliament’s oversight and approval role in Ghana’s PFM legal framework is critical.
MDAs and MMDAs report to Ghana Audit Service, the President and the Parliament on
PFM matters like budget implementation issues. MDAs also go before Parliament during
important budget and technical hearings to justify their policy priorities and resource
requests.
The legal framework for planning and budgeting in Ghana is laid out in important
legislation as follows:
1) Constitution of the Republic of Ghana (1992)
Article 179 (1) of the Constitution requires the President of the Republic of Ghana to
present the budget before the end of the financial year. Article 181 (1) notes that Parliament
may authorize entering into an agreement for granting loans out of any public fund or
public account. Subsequent sections define the Parliament’s role in approving the budget
as well as the role of the Bank of Ghana (BOG) in maintaining the stability of Ghana’s
currency.
2) Public financial management Act, 2016 (Act 921)
Sec. 21
a) The Minister shall,
 in consultation with the relevant stakeholders, prepare the proposed annual budget not later
than 1st October of each financial year; and
 Submit the proposed annual budget to Cabinet for approval not later than the 15th of
October of each financial year.
b) Cabinet shall, not later than the 30th of October of each financial year, communicate to the
Minister, the decision of Cabinet on the proposed annual budget.

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3) Financial Administration Regulations (2004)

Part V of the Regulation covers revenue and expenditure.
4) National Development Planning System Act (Act 480 of 1994)
The Act establishes the NDPC as the national coordinating body of the national and district
planning systems. As the coordinator, the NDPC may also promulgate regulations and
guidelines that dictate planning activities. The NDPC takes the lead in drafting the National
Medium Term Development Policy Framework (NMTDPF) and making sure MTDPs align
with the objectives of the NMTDPF.
5) Public Procurement Act (2003)
The Act strengthens the transparency in the use of state resources. It lays the foundation
for a standardized procurement system that takes into account Ghana’s decentralization
and local industry development policies. It also includes measures that reduce GOG
expenditure by reducing the waste and leakage of financial resources through effective
auditing, expenditure monitoring, cost effectiveness and value for money via transparent
competitive bidding. The Act ensures fair, non-discriminatory public procurement that
reduces or eliminates corrupt procurement practices. The Act establishes the Public
Procurement Board as the leading entity responsible for transparent procurement.
6) Internal Audit Agency Act (Act 658 of 2003)
The Act establishes a central internal audit agency to enhance efficiency, accountability
and transparency in the management of the GOG’s resources. The Act defines the objective
and functions of the Internal Audit Agency and its oversight roles. The Act also establishes
the Audit Agency as the coordinator of MDA and MMDA internal audit activities, and it
establishes the functions and membership of the Internal Audit Board.
Relationship between Planning and Budgeting in Public Sector

 Fiscal Planning; it is refers to government’s anticipation of revenues, expenditures and
borrowing in the ensuing year. It is critical in budgeting because it lays out the
macroeconomic and fiscal framework within which government budget is implemented.
 Macroeconomic Policy; it is government’s policy on revenue, expenditure, borrowing,
exchange rates determinants and money and credit rules. The primary aim of every
macroeconomic policy is to ensure a stable macroeconomic environment where risk and
uncertainties are reduced to the barest minimum. Macroeconomic policy is a function of
two policies, namely;
a) Monetary policy; it is a policy that guides money supply to achieve specific economic
goals such full employment, inflation, stability in exchange rate regimes and economic
growth.
b) Fiscal Policy; it is a policy that relates to government revenue (taxation), expenditure and
borrowing and how these variables are used to achieve economic stability. It is the
responsibility of the MoF to formulate a viable fiscal policy for the country.
Role of Fiscal Policy

a) Taxation policies help in mobilizing the needed resources for national development.
b) Helps accelerate economic growth by raising the rate of investment in public and private
sectors.

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c) Increasing public expenditure which in turn increases the level of employment.

d) Helps maintain internal and external economic stability.
e) Used as a tool for controlling inflation in the economy.
f) Used as a tool to divert resources from non-productive sectors to productive sectors of the
economy.
g) Increased in productivity emanating from tax holidays and incentives grated to
manufacturing companies.
h) Helps induce investment and capital formation.
Tools used by Government to Achieve Fiscal Policy

The main tools used to achieve the fiscal policy objectives include the following;
 Taxation – taxes can be used as a means of encouraging foreign investors to set up business
in Ghana
 Subsides – providing subsidies and incentives to local producers may serve as
encouragement to boost their production.
 The budget- budget as an instrument can be used to allocate resources in such a way to
create or maintain high employment
 Regulatory policies- government regulation could ensure that total resources are divided
between private and social goods
Legal Requirements for Fiscal Policies PFM Act, 2016 (Act 921)
Fiscal Policy objective (Sec 14); the primary fiscal policy of the government is to ensure
macroeconomic stability of the country within macroeconomic and fiscal framework.
General Principles of Fiscal Policy (Sec 13)

The principles are;
a) Public Accountability; the Principal Account Holder and Principal Spending Officer of a
covered entity shall be accountable to Parliament for the performance of their functions.
b) Generational Equity; Fiscal Policy shall be developed in a manner that takes into account
the impact on the welfare of the current population and future generations.
c) Macroeconomic Stability; Fiscal Policy shall be conducted in a manner that avoids abrupt
changes in the evolution of macroeconomic and fiscal indicators.
d) Prudence and Fiscal Sustainability; The management of public funds, assets and
liabilities including natural resources, and fiscal risks in the country shall be conducted in
a prudent way, with a view to maintaining fiscal sustainability.
Guiding Principles in Formulating and Implementing Fiscal Policy Objectives

(Sec.13)
The following principles shall guide the formulation and implementation of Fiscal Policy
objectives;
a) Sufficient revenue mobilization to finance Government programmes
b) Maintenance of prudent and sustainable levels of public debt
c) Ensuring that the fiscal balance is maintained at a sustainable level over the medium term
d) Management of fiscal risks in a prudent manner; and

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e) Achieving efficiency, effectiveness and value for money in expenditure
Fiscal policy indicators (Sec.17)

The following are fiscal policy indicators;
 the non-oil primary balance or non-oil fiscal balance, as a percentage of gross domestic
product
 public debt as a percentage of gross domestic product
 capital spending as a percentage of total expenditure
 revenue as a percentage of gross domestic product
 wage bill as a percentage of tax revenue
Fiscal Strategy Document (Sec.15)

It is a document that lays out comprehensive medium term information on government’s
fiscal plans. The Minister shall, not later than the end of May of each financial year, prepare
and submit to Cabinet for approval, a Fiscal Strategy Document, which shall specify
(content of the FSD)
a) the Medium-Term Fiscal Framework of the Government with measurable fiscal objectives
b) an updated and comprehensive medium-term macroeconomic and fiscal forecast
c) the Medium-Term Expenditure Framework of the Government with a resource envelope
and overall expenditure ceilings
d) a statement of policy measures the Government shall implement in order to stay within the
confines of the fiscal policy objectives
e) a comprehensive and quantified fiscal risk statement for the public sector showing the
impact of alternative macroeconomic assumptions on the forecast fiscal balances, and
quantified risks of guarantees, contingent liabilities and public private partnerships
f) the Medium-Term Debt Management Strategy
g) a progress report on the implementation of the Fiscal Strategy Document
h) the alignment of statutory and other earmarked funds to national macro-fiscal goals and
targets
Participants in the budgeting process and their responsibilities

The main participants or stakeholders in government budgeting include;
 The president/cabinet:
 Causing the budget to be prepared and laid before parliament at least one month before the
end of the current year.
 Obtain the budget framework policy and table it at cabinet for review
 Reviews and approves the budget proposal
 Receives budget proposal of statutory institutions and submit them to parliament.
 Minister of Finance and the ministry

 Developing the budgeting framework policy and submit it to the president
 Issue budget circulars /instructions to HODs
 Receive budget proposals from HOD through the sector ministers
 Conduct budget hearing and policy hearing

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 Prepare draft consolidated budget and submit to cabinet for review

 Submit and present the proposed budget to parliament
 Issues warrants and cash release instructions for the commitment and disbursement of
funds approved to departments
 Prepare and submit to parliament supplementary estimates
 Monitor and control budget performance through budget control reports.
 Heads of departments and the budget committees: HODs are required to established
budget committees (BC) in their departments. BC will be made up of HOD and the heads
of various BMC/CC. HODs/BC has the following responsibilities:
 Make estimate of department revenues and expenditure
 Develop departmental budget instructions in line with MOF budget guidelines
 Submit estimates to MOF through sector minster
 Participant in budget hearing and defend his estimates
 Exercise budgetary control over the departmental activities
 Parliament
 Receive budget proposal from president through MOF
 Examines, debate and approve the budget estimates through an Appropriation Act.
 Chapter 13 of the constitution grants Parliament, under an Act of Parliament, the right to
impose taxes, vote on appropriation bills, authorize the Government to spend money and
enter into debt and paying debt.
 Public (citizens, CSOs, NGOs, media, think tanks, trade unions etc.)
 Government budgeting is a public process and they make input in the formulation and
approval stage.
 Inputs are usually invited from civil societies, professional bodies and the general public.
Empowering the public to get involved in budgeting

Citizen participation in influencing the formulation and implementation of the budget, and
in ensuring the accountability and transparency of budget policy, is a hallmark of all
democratic societies. The public’s role in Ghana’s budget cycle usually occurs in March
and August of each fiscal year when citizens are encouraged or invited to attend
government sponsored public hearings. The hearings offer CSOs, NGOs, the media and
other members of the public the opportunity to voice their ideas or opinions in an effort to
influence resource allocation.
Empowering the public to get involved in budgeting includes:

 Making the public more aware of why budgeting is important
 Ensuring the public has access to data, information and reports
 Helping the public make sense of data, information and reports
 Supporting the public’s efforts to make their public institutions reflect their values, views
and interests

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 Making the public more aware that they have a legal right to access data, information and
reports
 Convincing the public that they can influence or shape budget policy; and
 Enhancing the quality of public service delivery through a more informed public that
understands how the equitable and efficient allocation of resources leads to improved
socio-economic development and fiscal stability.
Annual Budgeting Process/Ghana Budget Cycle

Ghana’s budget cycle or the annual budget processes has four main components. The
budget cycle shows how government meet national and sector development strategies and
deliver important service to their citizens. Some steps might take longer to prepare and
implement (budget formulation), other steps are regularly performed throughout the budget
cycle (M&E and Reporting), and the remaining steps (approval and implementation) are
usually determined by regulations that dictate when they commence and conclude.
Ghana budget cycle

1) Formulation and Authorisation: The budget is prepared for consideration.
Key Consideration: Have national and sector plans been aligned with available resources?
2) Approval: The budget is reviewed, amended and enacted into law
Key Consideration: Are allocations adequate to meet MDA and MMDA program and
activity objectives?
3) Implementation: Allocations to implement MDA MMDA programs and activities are
released by MOF
Key Consideration: Are funds released to MDAs and MMDAs is a predictable manner?
4) Monitoring & Evaluating and Reporting: Budget implementation is accounted and
assessed for efficiency
Key Consideration: Were funds spent as planned and did they effectively contribute to
service delivery?
Key points on Ghana’s budget cycle

a) Once the budget is approved it is then implemented
b) While the budget is implemented it is being monitored and evaluated
c) While the budget is being implemented GOG begins formulating the next budget
d) Lessons learned from previous budgets may be used to prepare the next budget
e) Hence, the Budget Cycle Never Ends.
1) Budget formulation
 The MOF develops a budget framework policy (Policy development stage) and submits
it to the president at least 8 months to the end of the current year.
 The policy document specifies the economic targets, government priorities, and available
resource base of government, sector constraints and the budget ceilings. These issues are
reviewed by cabinet and approved for use. It serves as the foundation for the budget
preparation.

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 The MOF issues a budget circular, budget guidelines and instructions to the various heads
of departments.
 The heads through the budget committees reviews and prepares their strategic plans,
estimated revenues and expenditures for the budget periods in line with the budget
instructions and constraints.
 The heads submit their plans and estimates to MOF through their sector ministers.
Covered entities in preparing revenue and expenditure budgets consider certain factors.
Revenue budget, which details out the revenues expected from taxes, non-tax revenues
and grants.
Factors to consider when preparing revenue budget;
 Identify all activities that already generate revenue.
 Identify all activities that have the potential to generate revenue.
 Estimate the frequency of these activities and calculate the revenue arising from these
activities
 Compute revenue arising by multiplying the budgeted rates with the frequencies
 Produce a monthly forecast identifying when revenue flows are projected to take place.
Expenditure budget, which details out all expenditures expected to be incurred by

government MDAs and MMDAs during the budget period.
Factors to consider when preparing expenditure budget
 Government macro-economic framework, government resources and priorities and
ceilings set by cabinet
 Strategic plan which includes a definition of department’s missions and objectives, output
and activities
 Cost and prioritize the activities of the department taking into consideration the resources
ceiling
 Prepare monthly estimates of expenditure
 Preparation of cash forecast identifying when expenditure outflow is projected to take
place.
2) Budget Authorisation
 The principal spending officers are call for a budget hearing to defend their plans and
estimates. During the budget hearing the MOF ensures that the plans and estimates are
consistent with government priorities, and budget constraints.
 At this stage the MOF has the authority to determine the appropriateness of the plans and
estimate of the departments prior to submission to cabinet
 The MOF consolidates the budget and submits to Cabinet for review and approval
 Final national budget is prepared and signed by the president.
Mechanisms to encourage public participation in budget formulation and

Authorisation include:

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 Inviting the public to attend budget technical meetings and affording them an opportunity
during a designated time of the meetings to provide feedback and comments about any
aspect of the proposed budget.
 Conducting public forums that would allow the public to concentrate on budget matters
and service delivery issues for a particular MDA – or in the case of cross sector issues
conduct public forums that would allow the public to discuss budget matters and service
delivery issues that are the purview of two or more MDAs.
 Requiring MOF, MDAs and other relevant government bodies to officially respond to all
feedback and comments raised by the public during meetings and forums within a certain
amount of time.
 Televising budget formulation meetings and forums.
 Publishing meeting or forum minutes in newspapers and on relevant government websites.
3) Budget approval
 The final budget is submitted to Parliament is a manner prescribed by parliament.
 The budget statement is laid before parliament in the form of Appropriation Bill and
Finance Bill
 Parliament considers and debates the budget and approves or disapproves it.
 The expenditure estimates are approved by passing the Appropriation Act.
 The Finance proposal are approved in the Finance Act
The following three Parliament committees are responsible for public finance and
budgeting issues in Ghana:
a) The Special Budget Committee that considers the budget of Parliament and other
constitutionally independent bodies.
b) The Public Accounts Committee that examines audited accounts showing the
appropriation of the sums granted by Parliament to meet the Government’s expenditure.
The PAC also considers the institutional capacity, mandate, procedures and processes of
the CAGD and other entities that produce audited reports.
c) The Finance Committee that examines international loan agreements and monitors
foreign exchange receipts and payments.
Mechanisms to encourage public participation in budget approval include:

 Inviting the public to attend Parliament debates about budget proposals before the Budget
Appropriations Bill is passed.
 Televising the debates and any other meetings or hearings the government conducts to
approve the budget.
 Publishing budget approval meeting or hearing minutes in newspapers and on relevant
government websites.
4) Budget implementation
Budget implementation is the component of the budget cycle that requires MDAs to
implement their MDTPs, work plans and cash plans and spend their money. It is the

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component of the budget cycle where MDAs and other stakeholders strive to achieve the
GOG’s socio-economic development objectives and deliver essential public services.
Budget implementation does not happen automatically. It is an involved process that

ensures compliance with the budget that was approved by Parliament, and it should work
seamlessly with the budget cycle’s other components or steps.
Budget implementation cycle

Once the budget is approved by Parliament MDAs have to implement their budgets. The
success of budget implementation hinges on how well budget formulation and approval are
conducted.
The budget implementation cycle in Ghana consists of five main components.

 Component 1 – Budget Approval
The first component is the enactment of the Budget Appropriation or budget approval by
Parliament. The approved budget includes the approved appropriations that MDAs have to
follow to implement their MTDPs and spend their funds. The budget must become law
before MDAs have the authority to begin implementing their programs and activities and
spend money.
 Component 2 – MDA Work Plans
MDA work plans, also called Plans of Action, help MDAs determine how they will
implement their Medium Term Development Plan (MTDP) programs and activities during
the financial year (FY). MDA work plans are approved by MOF. Work plans are prepared
and approved before the end of the first quarter of any given FY.
 Component 3 – MDA Cash Management Plans
A well-conceptualized cash management plan and strategy helps MDAs ensure cash
liquidity during any given FY. The plans should reflect cash requirements and information
about when warrants will be requested and when budget implementation status reports will
be submitted to MOF. Cash management plans are prepared and approved before the end
of the first quarter of any given FY.
 Component 4 – Funds Release
Funds release involves the approval, commitment and release of funds (warrants). Funds
release may occur at any point of a FY.
 Component 5 – GIFMIS and Accounting Control
GIFMIS controls and tracks financial transactions and allows MOF and CAGD to
determine if MDA financial transactions comply with the PFM and FAR and budget
appropriations.
Mechanisms to encourage public participation in budget implementation include:

 Inviting the public to attend the budget mid-year review meetings and affording them an
opportunity during a designated time of the meetings to provide feedback and comments
about any aspect of budget implementation.
 Conducting public forums for each MDA that would allow the public to ask questions and
seek clarification about budget implementation issues.

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 Requiring MOF, MDAs and other relevant government bodies to officially respond to all
feedback and comments raised by the public during budget implementation meetings and
forums within a certain amount of time.
 Televising the mid-year budget review meetings and any other meetings or hearings the
government conducts to implement the budget.
 Publishing mid-year budget review meeting minutes in newspapers and on relevant
government websites.
5) Budget Monitoring, Evaluating and Reporting

Budget monitoring, evaluating and reporting is how the Government ensures that its
resources are allocated and spent in a transparent and responsible manner. The three
activities let all budgeting stakeholders know if MDAs are spending their resources
according to MTDPs and agreed programs and activities.
 Budget Monitoring is a continuing function that aims to primarily provide decision
makers and other stakeholders of an ongoing intervention with early indications of
progress, or lack of progress, in achieving expected budget performance results
 Budget Evaluating is a specific activity that attempts to systematically and objectively
assess progress towards and the achievement of an expected outcome (as agreed in a
MDA’s MTDP)
 Budget Reporting is a tool that requires MOF, CAGD, GRA, other agencies and MDA
finance, planning and technical staff to convert data and information, usually through some
form of analysis, into a format that is useful for decision makers to make policy and
operational decisions.
Mechanisms to encourage public participation in budget monitoring and evaluation

include:
 Encouraging citizens to report fraud, financial mismanagement and tax evasion.
 Publishing all budget reports on MOF’s website or relevant MDA websites.
 Conducting public forums that would allow the public to ask questions and seek
clarification about budget performance and evaluation.
 Requiring the appropriate government entity to officially respond to all feedback and
comments raised by the public during budget performance and evaluation forums within a
certain amount of time.
Budget Management and Control Activities

When a budget is finally approved, certain activities are required to ensure that the budget
targets are met. They are called post budget implementation activities. These activities
include;
a) Budget performance reporting (to be submitted by PAH)
b) Mid-year fiscal review (to be done by the MoF not later than 31st July each year)
c) Re-allocation of funds of covered entities
d) Commitment of funds reports
e) Cash flow forecasts
f) Submission of half yearly reports

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g) Supplementary estimates
h) Virement
Supplementary Estimates
This is a budget prepared by the MoF during the course of the year as a review or
amendments to the original budget when current circumstances in the economy demand
so.
Content of supplementary budget (FAR 173)

A supplementary budget is expected to show the following information;
 A statement of any increase or decrease of revenue and expenditure estimated for the
financial year.
 Comments of the sector minister on the revised estimates;
 Comments of the minister of finance.
 Statement of supplementary estimates required for planned activities.
Events that may lead to preparation of supplementary budget (Causes)

 Insufficient funds for existing activities
 Introduction of new activities (FAR 175)
 Increased activity costs that could not be foreseen when the annual estimates were
presented (FAR 176)
 Underestimation of the cost of certain activities during budget preparation
 Unforeseen circumstances such as disasters and other natural catastrophes
Virements
A virement is the transfer of funds within administrative expenditure or service
expenditure. The transfer must be within a single budget heading (expenditure
classification). Virements do not affect the total amounts of funds disbursed to a single
budget heading, but they will affect amounts of funds for sub-heads, sub-items or sub-sub-
heads. In Ghana, the Financial Administration Regulation, Article 171, defines a virement
and the rules for issuing a virement. It is the process of meeting the need of over spending
in one area of expenditure by under spending from another area of expenditure subject to
approval of the appropriate authorities. It must be done under the same head of expenditure.
Virements are processed on GIFIMIS.

The 7 steps for issuing a virement in Ghana
a) MDA applies for virement
b) Office of the Minister of Finance registers application if virement is justified
c) Chief Director reviews application
d) Director of Budget review request
e) Schedule Officer processes virement
f) Director approves request and signs letter endorsing virement
g) MDA vires funds.

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Virement rules:
1) The Minister may, on the request of a Principal Spending Officer, execute a virement in
respect of an amount of money allocated to the covered entity of that Principal Spending
Officer.
2) A virement executed under subsection (1) shall not result in a future liability for that
covered entity or the Government.
3) A virement executed under subsection (1) is subject to the following conditions:
a) a virement of funds allocated for wages and salaries in an expenditure vote shall not be
made unless the virement is in respect of wages and salaries within that expenditure vote;
b) a virement that involves a change in the spending plans approved by the Minister for the
current financial year shall require the prior written approval from the Minister;
c) a virement may be made from a recurrent expenditure to capital expenditure as well as
from one capital expenditure to another capital expenditure but shall not be made from a
capital expenditure to a recurrent expenditure; and
d) A virement shall not be made in respect of appropriated amounts between covered entities
without the approval of Parliament in a supplementary estimate.
TYPES OF BUDGET IN THE PUBLIC SECTOR

 Balanced budget- a budget for which expected receipts are equal to expected expenditure.
 Surplus budget- a budget for which total receipts is more than total payments.
 Deficit budget- a budget for which current receipts are less than current expenditure
A deficit budget may be prepared under the following circumstances (causes)
a) Period of major economic depression (reduction in business activities)
b) Political pressure (especially during election)
c) Wars and conflicts
d) Periods of economic development
e) Low revenue mobilization
f) Weak expenditure controls
Ways of financing a deficit budget (deficit financing)

 Taxation
 Removal of subsidies
 Taking loans
 Printing more currencies
LOCAL GOVERNMENT BUDGETING

Overview of Local Government
 Article 240 of the Constitution provides for the establishment of system of local
government and administration which should be decentralized.
 The Local Government Act 1993, Act 462 was promulgated to ensure that the functions,
powers, responsibilities and resources are all times transferred from the central government
to the local governments in a coordinated manner.
 The local government concept is what is termed the district assembly system in Ghana

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Concept of Decentralisation
 Decentralization is the process of redistributing or dispersing functions, powers, people or
things away from a central location or authority.
 In government, decentralisation refers to the transfer of power, responsibilities, functions
and resources from the central government to the local people through the local authorities.
 Decentralisation, or decentralising governance, refers to the restructuring or reorganization
of authority so that there is a system of co-responsibility between institutions of governance
at the central, regional and local levels according to the principle of subsidiarity, thus
increasing the overall quality and effectiveness of the system of governance, while
increasing the authority and capacities of sub-national levels.
 For Ghana, decentralization is the process of transferring or dispersing public sector
decision making powers to local government or district assemblies. It entails the transfer
of power and resources from the national government to subnational governments.
Forms of Decentralisation
1) Political decentralisation
 Political decentralization aims to give citizens or their elected representatives more power.
 It involves giving citizens, or their representatives, more influence in the formulation and
implementation of laws and policies.
 It is stronger when the local citizens are allowed to elect their own leaders who will be
accountable to them.
2) Administrative decentralization
 It involves giving the local people administrative powers to make decision without recourse
to the central government
Three forms of administrative decentralisation:

 De-concentration: The weakest form of decentralization, shifts responsibility for decision-
making, finance and implementation of certain public functions from officials of central
governments to those in existing districts or, if necessary, new ones under direct control of
the central government.
 Delegation: Passes down responsibility for decision-making, finance and implementation
of certain public functions to semiautonomous organizations not wholly controlled by the
central government, but ultimately accountable to it.
 Devolution: Transfers all responsibility for decision-making, finance and implementation
of certain public functions to the sub-national level, such as a regional, local, or state
government.
3) Fiscal decentralization
 Fiscal decentralization means decentralizing revenue raising and/or expenditure of moneys
to a lower level of government while maintaining financial responsibility.
 Fiscal decentralization can be achieved through user fees, user participation through
monetary or labour contributions, expansion of local property or sales taxes,

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intergovernmental transfers of central government tax monies to local governments

through transfer payments or grants, and authorization of municipal borrowing with
national government loan guarantees.
4) Economic Market Decentralisation

 Economic decentralization can be done through privatization of public owned functions
and businesses, as described briefly above.
 It also is done through deregulation, the abolition of restrictions on businesses competing
with government services, for example, postal services, schools, garbage collection.
Reasons for Decentralisaton

 It enhances the democratic voice.
 It leads to local efficiency, equity and development.
 It increases involvement of local jurisdictions and civil society in the management of their
affairs, with new forms of participation, consultation, and partnerships.
Barriers to Decentralisation
 Weak local administrative or technical capacity may result in inefficient or ineffective
services;
 Inadequate financial resources may be made available to perform new local
responsibilities, especially in the start-up phase when they are most needed;
 Inequitable distribution of resources may result;
 Danger of complexity of national policy coordination;
 It may allow local elites to capture functions;
 Higher enforcement costs and conflict for resources if there is no higher level of authority.
 High cost of decentralisation
 Possibility that corrupt local elites can capture regional or local power centres.
Creation of Assemblies
The Act 462 vested the power to declare an area as district, municipality, and metropolitan
in the President. The president exercises this power in consultation with the Electoral
Commission because the creation of an assembly may affect the alignment of existing
constituency.
Factors considered in the declaration:

 Population (75,000 = DA; 95,000 = MuA and 250,000 = MeA)
 Geographical contiguity
 economic viability
Upon declaration, the MLGD introduces a Legislative Instrument (L.I) to parliament to

incorporate the assemblies. The L.I contains among others:
 Name of the assembly and area of authority
 Number of persons to be elected to the assembly
 Jurisdictions, functions, powers and responsibilities

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 Place where the principal offices are situated
The passage of the L.I completes the creation process and the assembly becomes a
corporate entity with rights and responsibilities under the laws.
Structure of Ghana’s Local Government System

Local government structure generally consists of the following:
 Regional Coordinating Council
 Metropolitan Assembly
 Municipal or District Assembly
 Urban or Town or Area or Zonal Council
 Unit Committee
The Regional Coordinating Councils represent the highest level of Local Government in
Ghana and are established in each of the regions of the country.
Composition of General Assembly

Persons eligible to represent in the assembly include:
 The chief executive (DCE/MCE/Mayor) appointed by the president subject to confirmation
by at least 2/3 of members
 One representation of each electoral area elected in adult suffrage
 The MP/MPs whose constituency falls within the jurisdiction of assembly
 Persons elected by the president not exceeding 30% of total members.
Functions of the MMDAs

The assembly is the highest administrative, deliberative and political authority in the area
of jurisdiction. The assembly performs the following functions, among others:
 To ensure the overall development of the district
 To effectively mobilize resources for the overall development of the district
 To promote and support any productive district activities and development
 To develop environment and human settlements in the area
Intergovernmental Relationship
The Central Government is required to transfer powers, functions, responsibilities and
resources to the MMDAs in a coordinated manner. Intergovernmental links are necessary
in order to:
 Ensure that local services reflects national priorities and policies and are provided on
comparable standard basis
 Ensure that MMDAs spending are compatible with national economic objective
 Ensure harmony of activities among the MMDAs themselves.
 Safeguard the interest of the vulnerable minority groups
 Encourage and maintain local democracy
Budgeting in the MMDAs

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 The MMDAs are granted the authority to prepare and approve their own budget without
recourse to parliament.
 The budgeting process is guided by the budget framework policy issued by the MOF to the
Chief Executive.
MMDAs budgeting process

 The chief executive issue calls for estimates to the heads of the various departments in the
assembly requesting them to make their expenditure and revenue estimates for the year.
 The heads prepare their estimates and submit them to the budget committees through the
budget unit.
 The budget committee prepares a draft and submits it to the Finance and Administration
sub-committee for review.
 The final budget is prepared based on the reviews along with a fee-fixing proposal
 The budget and the fee-fixing proposal is laid before the general assembly for approval.
 The assembly considers the budget and approves it before the end of the current financial
year.
 The fee-fixing resolution will also be passed by the assembly to give approval for revenue
mobilization.
 Copies of the approved budget is submitted to the RCC, MLGD and the MOF
Composite Budgeting in MMDAs

 Composite Budget is an aggregation of projected revenues and expenditures of the
Departments and institutions of the MMDAs
 Composite budget seeks to harmonize the budget of all decentralized departments and
bring them under the ambit of the Assemblies’ budgeting process.
 Composite budgeting is a tool to effectively facilitate, the coordination, harmonisation of
planning and budgeting at the district level.
 Composite budget was piloted in three assemblies from 2003 - 2005 and in 2011 a policy
decision was taken to fully implement composite budgeting in all the MMDAs effective
2012 budget year.
Legal Provision
Section 92 (3) of the Local Government Act of 1993 provides for composite budget as
follows: The budget for a district shall include the aggregate revenue and expenditure of
all departments and organisations under the District Assembly and the District
Coordinating Directorate, including the annual development plans and programmes of the
departments and organisations under the Assembly.
Objectives of Composite Budgeting

The composite budgeting process aims at ensuring:
 Cost effectiveness in the planning and implementation of district programmes;
 Holistic development of the MMDAs
 Transparency in the use of resources;

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 Effective planning and utilization of resources;

 A unified approach for district and national budgeting system;
 Uniform system of monitoring, evaluation and reporting system; and
 Determination of the total inflow and outflow of resources to the Assembly
APPROACHES TO PUBLIC SECTOR BUDGETING

In general, budget system may be input based or output based.
Input based budgets are primarily concerned with accountability and stewardship for
public resources by ensuring fiscal accountability for every resource used by the
department. This is the traditional budgeting approach in the public sector based on cash
budgeting. A type of this approach is the line item budgeting.
Output based budgets are outcome oriented which focuses on the performance of
managers and programmes and activities. Types are planned performance budgeting,
activity based budgeting, programme based budgeting.
On the other hand, determination of cost of the budget item or activity may be done in
either of two ways: Incremental budgeting and Zero based budgeting
Incremental budgeting: This method of budgeting is closely linked to input based
budgeting system/line item budgeting system. Under this approach, the budget is derived
by making marginal increments to previous years estimate. There is no much need for
review of activities or items for inclusion in the current budget.
Incremental Budgeting Advantages

 Makes budgeting simple
 It ensures continuity in government programmes and activities
 It maintains inertia, thereby reducing risk
 It remains the most popular approach to budgeting in public sector entities
Disadvantages are:
 It encourages budget slacks in putting together a budget
 It leads to allocation of resources to irrelevant items or activities.
 That is obsolete spending It discourages change in public entities
Line item budgeting

Most popular traditional approach to budgeting is the line item budget (a.k.a input
budgeting, object of expenditure budget, or lump sum budgeting). Under this method,
resources are allocated to each item of expenditure with any measure of output. The
emphasis is on input rather than output.
Line item budgeting Advantages are:

 It is very simple to prepare and control
 It enhances fiscal accountability and control
 It fits into the limitation of public administration
 It provides clear indications of the ambit of a vote.

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Disadvantages are
 Fails to measure attainment of objective/outcome
 Provide no link between resource allocation and level of service delivered
 It provides too much detail which makes control very cumbersome.
 It provide no clue to guide resource allocation decisions
Zero Base Budgeting

ZBB approach calls for the review and revaluation of each item or activity whenever a
budget is prepared. This approach requires that all activities are justified and prioritized
before decisions are taken relating to the amount of resources allocated to each activity
Here the budget estimate is prepared independent of the previous budget in that the mere
existence of the item or activity in the previous budget does not justify its inclusion in the
budget.
ZBB process involves

 Identification of decision units which entails identifying responsibility centre and the
objectives as the basis of budget preparation
 Development of clear decision packages (mutually exclusive and incremental packages)
 Evaluation and ranking decision packages
 Allocate resources
Advantages of ZBB
 It eliminates budget slacks and inefficient activities.
 It serves to motivate managers at all levels
 Encourages culture of change in the organisations
 It ensures more efficient allocation of resources
 Enhances effective planning and control of activities
Disadvantages of ZBB
 It is difficult and time consuming
 Requires higher level of skills and competences for developing decision units and packages
which may be lacking in the sector
 Ranking of decision packages may be influenced by political consideration
Programme Based Budgeting

It is a performance based budgeting system evaluated on programme basis. Programme-
based budgeting is the practice of developing budgets based on the relationship between
program funding levels and expected results from that program. The programme-based
budgeting process is a tool that program administrators can use to manage more cost-
efficient and effective budgeting outlays. The Programme Budget shows what each cedi
will accomplish, generally in the way of a measurable result achieved (such as a reduction
in accidents, an improvement in health, an increase in customer satisfaction, etc.).
Currently government is using the programme based budgeting system under the GIFMIS

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Programme budgets use statements of missions, goals and objectives to explain why the
money is being spent. It is a way to allocate resources to achieve specific objectives based
on program goals and measured results.
There are three elements to PBB:

 The result/objective (final outcome)
 The strategy (means of achieving the result)
 Activity/output (what should be done)
Steps in programme based budgeting:

The four steps involved in PBB are:
 Identifying Budget Programmes
 Organisational Mapping
 Developing the Budget Programme Summary
 Budget Programme Results Statement
PBB Advantages
 PBB specifically links resource allocations to MDA functions and its strategic policy
objectives.
 PBB provides a framework against which to measure the performance of MDA expenditure
programmes
 PBB structures allow for the identification of necessary inputs to produce the core
operations and projects required in order to contribute to strategic objectives.
 PBB provides a management framework within which MDAs can effectively manage
resources to achieve government objectives
 It provides the public with a clear and transparent means of seeing the fiscal stewardship
PBB Disadvantages
 It difficult to define measurable outcome of most public sector programmes
 The process is time consuming and distractive to both legislators and administrators
(budgeting becomes the end instead of the means)
 Resource allocation may be influenced by political and social factors instead of cost
benefit analysis. This undermines the budgeting process.
Activity based Budgeting (ABB)

It’s a variation of ZBB where resources are linked to the activities leading the attainment
of set objectives (outcome). ABB refers to the resource allocation based on relationship
between activities and costs, and which provides greater detail on overheads than the
normal financial budgeting. ABB provides a framework that links resources to the activities
to be carried out in attaining the set objectives (outcome). ABB is a method of budgeting
in which the activities that incur costs in every functional area are accounted for, analyzed,
and then linked to the mission and strategic goals of the institution. The full costs of
programs and services are then more transparent and available to help with planning,
budgeting and decision making.

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ABB Advantages
 Output costs are supported by a schedule of cost activities drivers (provides details of cost)
Opportunities to examine work processes.
 Identifies non value adding activities that can be eliminated.
 Basis of a performance measurement system and direct link between strategic goals and
operational realities.
 Enables cost profiles to be managed
 Accurate costing data for operational management
 Costs are transparent, understandable and actionable
ABB Disadvantages
 Activity definition may become too detailed and the model may become too complex and
difficult to maintain.
 Underestimation of the task of collecting activity driver data
 Implementation may be considered a financial management “fad” and there is insufficient
commitment from operational managers
 Lack of performance indicators of MDA budgets also made it difficult to measure budget
performance and outputs.
 An absence of a real strategic focus in MDA budgets with limited linkage between resource
allocations and policy
REVENUE MANAGEMENT AND EXPENDITURE CONTROL

Introduction
Government policies are only delivered when government is able to raise the needed
resources and disburse them prudently. It is therefore imperative to effectively manage
revenue and expenditure through a robust control system.
Overview of Internal Controls

Internal control is a very essential component of revenue control and expenditure
management. According to COSO’s framework, internal controls is a process effected by
an entity’s Board of Directors, management and other personnel designed to provide
reasonable assurance regarding the achievement of objectives in the following categories;
 Effectiveness and efficiency of operations
 Reliability of financial reporting
 Compliance with applicable laws and objectives
In other words, internal controls are the mechanisms, rules and procedures implemented
by an entity to ensure sound financial and accounting information, improve operational
efficiency, promote accountability and prevent fraud.
Components of internal control

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a) Control environment; the tone of the organization including integrity, ethical values,
morale, competence, management style, organizational structure, authority and
responsibility etc.
b) Risk assessment; the ability of the organization to identify risk that has the propensity to
affect the achievement of the objectives of the organization
c) Control activities; these are the policies and procedures that have been put in place to
ensure that management directives are carried out. This is what most people think of when
they hear internal controls.
d) Information and communication; this relates to the manner in which information is
disseminated.
e) Monitoring; this component of internal controls ensures that the internal controls in place
are functioning effectively.
Responsibility for Internal Controls over Revenues

General Principles for Designing Internal Controls over Revenues
a) Segregation of duties
b) Clear responsibility
c) Banking gross revenue collected
d) Documentation
e) Maximum custody
f) Authorisation
Expenditure control techniques

The objective of expenditure control is to ensure that public resources are spent as intended,
within authorize limits and following sound financial management principles.
Expenditure Cycle and Control Processes

Government expenditure goes through a certain cycle/stages outlined below;
a) Authorization of expenditure
b) Apportionment of authorization for specific periods and spending units
c) Reservation
d) Commitment
e) Verification/certification
f) Payment order
g) Payment
TREASURY SINGLE ACCOUNT

TSA is a cash management system of government. It is a unified structure of government
accounts to give a consolidated view of government cash resources. All government cash
including monies received by covered entities shall be deposited and from which all
expenditures of government and covered entities shall be made.

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Modules of TSA
There are two modules from which any government chooses. These include;
a) The main TSA and associated ledger sub-accounts (where they exist) are to be maintained
in a single banking institution.
b) The main TSA is maintained in a single banking institution and associated zero balance
ledger sub-accounts (where they exist) are maintained in other institutions where balances
are swept daily into the main TSA.
Benefits of Treasury single account system

a) TSA allows complete and timely information on government cash
b) Improves appropriation control
c) Improves operational control during budget execution
d) Promotes efficient cash management
e) Reduces bank fees and transaction costs
f) Facilitates efficient payment mechanisms
g) Improves bank reconciliation and quality of fiscal data
General principles of operating treasury single account

 Government agencies are not to operate any bank account under any guise, outside the
purview and oversight of the treasury.
 The consolidation of government cash resources should be comprehensive and encompass
all government cash resources, both budgetary and extra-budgetary.
 Government banking arrangement should be unified, to enable the relevant Government
stakeholders such as the Ministry of Finance (MOF) and the Controller and Accountant
General (CAG) have full oversight of Government cash flows across bank accounts.
Challenges of Treasury single account

a) Change management obstacles relating to the change over from multiple bank accounts
arrangement to treasury single account.
b) It may introduce some further bureaucracy into the payment processes at the covered
entity some level.
c) Less efficient banking and inter-payment systems will adversely affect the operation of
the treasury single account system.
TUTORIAL QUESTIONS
1) Fiscal Decentralisation is one of the key public financial management reform initiatives
embarked upon by Ghana over the past decades to facilitate national development in a
bottom up manner.
Required:
a) Explain the concept of Fiscal Decentralization.
b) Enumerate FOUR (4) factors that underpin successful Fiscal Decentralization in Ghana as
a public sector financial management and public administration tool.

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2) The problems associated with decentralized financial administration and exercising

controls have received considerable attention from both academicians and legislators.
Required:
Explain FOUR reasons why it is necessary to have a decentralized financial management
system in Ghana.
3) Budgeting is an essential element of Public Financial Management and it is a requirement

of the Constitution and other Public Financial Management enactments. Budgeting is a
process that requires the engagement and participation of citizens for accountability
purposes. The prime objective of budgeting is to set out the financial plans of government
for the ensuing year and how government plans and programmes will be financed.
Required:
a) Explain TWO (2) provisions in the 1992 Constitution relating to budgeting.
b) Explain Citizen’s Budget and identify THREE (3) of its benefits in Public Financial
Management.
c) Explain the role of budget guidelines in budgeting and identify FOUR (4) items of
information to be expected in a budget guideline.
4) The following transactions relates to Tham District Assembly (TDA):

a) The estimated internally generated funds of the Assembly for the fourth quarter of 2021
and first quarter of 2022 are given below:
Oct 2021 Nov 2021 Dec 2021 Jan 2022 Feb 2022 Mar 2022
GH¢000 GH¢000 GH¢000 GH¢000 GH¢000 GH¢000
Fees and Charges 300,000 320,000 310,000 400,000 450,000 420,000
Licenses 120,000 120,000 200,000 180,000 140,000 160,000
Property rate 800,000 1,200,000 1,000,000 900,000 900,000 1,300,000
Fines and Penalties 50,000 50,000 40,000 60,000 80,000 80,000
b) The revenue policy of the Assembly is as follows:

Source of revenue Collection Policy
Fees and Charges 100% of Fees and Charges are expected to be collected in the month of
estimation.
Licenses Licenses are collected in the month following the month of estimation.
Property rate Property rate are collected in the third month after the month of
estimation.
Fines and Penalties Fines and Penalties are collected on the spot.
c) Experience shows that about 10% of the amount owed in respect to property rate is never
received.

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d) Decentralised transfer is estimated at GH¢2,000,000 and GH¢1,800,000 for the first and
second quarters of 2022 respectively. The decentralised transfers are often released in
second month of each quarter, except first quarter which is released in the last month.
e) Goods and services are paid two months in arears. The projected expenses in the
Assembly’s 2021 and 2022 budgets are as follows:
Oct 2021 Nov 2021 Dec 2021 Jan 2022 Feb 2022 Mar 2022
GH¢000 GH¢000 GH¢000 GH¢000 GH¢000 GH¢000
365,000 280,000 280,000 290,000 200,000 320,000
f) The Assembly budgets to acquire equipment and furniture amounting to GH¢300,000,000

in the month of February 2022. It has planned that 50% of the amount will be paid in the
month of purchase and the balance paid equally over the following two months. The
equipment and furniture will be depreciated at the rate of 10% per annum.
g) The cash and cash equivalent balance at the end of 2021 financial year was GH¢63,000.
Required:
Prepare a Cash Flow Forecast for the first quarter of 2022, showing clearly the forecast for
each month and the quarter as a whole.
5) Budgeting is an essential and mandatory financial management process in the public sector.
It plays significant role in public financial governance.
Required:
a) Discuss the legislative framework for public sector budgeting in Ghana.
b) Explain FOUR (4) benefits of budgeting in the public sector.
6) A principal spending officer is of the view that the organisation can always carry out
unbudgeted activities, programmes and projects through the use of virement. He argues
that virement is a smart way of going around the rigid rules that govern national budget
implementation.
Required:
a) Explain virement as a tool in public financial management.
b) Discuss the prohibitions on the use of virement under the Public Financial Management
Act, 2016 (Act 921).
7) The Minister of Finance shall, not later than the end of May of each financial year, prepare
and submit to Cabinet for approval, a Fiscal Strategy Document.
Required:
Outline FIVE (5) issues that should be specified in the Fiscal Strategy Document.

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8) National budgeting is not only a legal process but also an administrative process that ensure
attainment of public value economically, efficiently and effectively. Budget reliability and
credibility are essential components of the budget management processes.
Required:
a) Explain, with practical illustration the term budget reliability.
b) Discuss how a reliable budget will help government to achieve the following:
 Public accountability
 Strategic resource allocation
 Coordination and Control
9) Since the creation of Atuum District Assembly (ADA) in 2011, inadequate revenue
mobilisation has been its major challenge making the Assembly unpopular. The newly
appointed District Chief Executive (DCE) is concerned about the effectiveness of the
revenue budget system of the Assembly.
Below is the extract of the Revenue Budget of the Assembly for the 2021 financial year.
Annual Budget Actual to March
Revenue
GH¢ GH¢
Licenses 880,000 244,000
Fees and Miscellaneous charges 3,400,000 890,000
Investment income 600,400 178,000
Property rate 5,400,000 1,310,000
Basic Rate 750,000 120,000
Grants and donations 1,000,000 320,000
The budget allocation over the various items over the quarters is in the ratio of 3:3:2:2. The
DCE indicates that the budget reliability measures of Public Expenditure and Financial
Accountability (PEFA) are ideal for assessing the budget performance of the Assembly. In
the framework, the following interpretation is given to budget outruns:
 Outturn/variance not greater than 5% is scored as A, indicating very good budget reliability
 Outturn higher than 5% but not exceeding 10% is scored B, indicating good budget
reliability.
 Outturn higher than 10% but not exceeding 15% is scored C, indicating average budget
reliability.
 Outturn higher than 15% is scored as D, indicating poor budget reliability.
Note that each revenue item is treated as an indicator under the PEFA framework.
Required:
a) As the Budget Officer, prepare the statement of budget performance for the first quarter of
the 2021 financial year, indicating clearly the outturn percentage and the respective scores.

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b) Write a report to the DCE on the budget performance of the Assembly and suggest ways
of improving the budget reliability of the Assembly.
c) Discuss FOUR (4) benefits of effective revenue budgeting in the Assembly.
10) Article 179 (1) of the 1992 Constitution of the Republic of Ghana mandates the President
to submit a budget to parliament each year for approval. Furthermore, the Public Financial
Management Act 2016 Act 921 and the Financial Management Regulations 2019. L.I. 2378
regulate among others, the budget formulation, approval, implementation, accounting and
auditing.
Required:
a) Discuss the major activities in Ghana’s budgeting processes, including the budget calendar,
clearly showing the implications of the Medium Term Expenditure Framework (MTEF)
and the change from activity-based to programmed-based.
b) Discuss the limitations of national budgeting in Ghana.
11) National budgeting is not an ordinary activity of government but a requirement of Article
179 of the 1992 Constitution, which imposes the duty on the President of the Republic to
cause a budget to be prepared and laid for approval for the ensuing year before the end of
the current financial year. However, some argues that national budget is a mere façade and
therefore adds no value to national development.
Required
a) Justify the need for national budgeting as an essential element of Public financial
management in Ghana.
b) Discuss the limitations of national budgeting in Ghana
12) A government Ministry has provided the following information about its budgeted actual
overhead and personnel cost for 2014.
Actual Budget
GH¢000 GH¢000
Compensation 2,490 2,600
Goods and services:
Traveling and transportation 1,030 875
Utility services 317.5 355
Telephone services 2,625 210
Stationary 986 116
Maintenance of vehicles 635 605
Maintenance of capital assets 1,182.5 1,575
Staff training of development 1,725 202.5
Assets:
Office furniture 364 400

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The following information is also relevant:

a) Increase in 2015 activities will attract 15% overhead cost
b) 12% of total salaries in 2015 is required to meet the additional personnel cost in 2015.
c) The personnel costs of the year 2014 include GH¢945,000 spent on staff allowances. The
staff allowances will attract 25% of 2015 staff salaries
d) However, an inflation of 10% on overhead cost is recognized in the computation of 2015
budget
e) The current level of capital assets would be enough to support the activities in 2015.
You are required to prepare, on the incremental basis, the budget for 2015
13) Discuss the phases of budgeting in the annual budgeting cycle, emphasizing the key
activities involved in each phase.
14) Accounting and Reporting is a major pillar of public financial management under the PEFA
framework. Indicators of effective Accounting and Reporting are financial data integrity,
in-year budget reports and annual financial reports. A recent evaluation of the Accounting
and Reporting system of Ghana is presented below.
Indicator Dimension Score
Financial data integrity Bank account reconciliation C
(M2) Suspense accounts B
Advance accounts D
Financial data integrity processes B
In-year budget reports Coverage and comparability of reports B
(M1) Timing of in-year budget reports C
Accuracy of in-year budget reports B
Annual financial reports Completeness of annual financial reports A
(M1) Submission of reports for external audit B
Accounting standards C
Required:
a) Compute the score of each of the three indicators of Accounting and Reporting Pillar of
the country, using the appropriate methodology of PEFA.
b) Based on your results in question above, proffer four (4) ways by which accounting and
reporting element of public financial management can be improved.
15) National budgeting involves series of processes and activities, of which budget
authorisation and budget approval are critical.
Required:
a) Explain the difference between budget authorisation and budget approval in the national
budgeting process of Ghana.

CONTACT: 0541718677/0206931347
b) Describe the major activities involved in:

 Budget authorisation
 Budget approval
16) In designing internal control over revenues, one must consider the broader elements of
internal control as provided by the COSO framework of integrated internal control.
Required:
Explain the implications of the following elements for revenue control policy:
a) Control environment
b) Risk assessment
c) Information and communication

CONTACT: 0541718677/0206931347

BUDGETING IN THE PUBLIC SECTOR

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BUDGETING IN THE PUBLIC SECTOR

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ASSURANCE PROFESSIONAL SCHOOL

PUBLIC SECTOR ACCOUNTING & FINANCE: PUBLIC SECTOR BUDGETING

According to the International Public Financial Management Handbook, a budget,

Features of Public Sector Budget

Objectives of government budgeting

Terminologies associated with government budgeting

COMPILED BY: LINUS BRAIN DELAVENUNYE (IMOLE), BSC ACCT, CA

b) Budget Ceiling – A budget Ceiling is an important component of MTEF and budget

Functions and uses of a budget

COMPILED BY: LINUS BRAIN DELAVENUNYE (IMOLE), BSC ACCT, CA

transparency in the allocation of resources to the various sectors and projects of

PFM LEGAL FRAMEWORK FOR PLANNING AND BUDGETING IN GHANA

COMPILED BY: LINUS BRAIN DELAVENUNYE (IMOLE), BSC ACCT, CA

3) Financial Administration Regulations (2004)

Relationship between Planning and Budgeting in Public Sector

Role of Fiscal Policy

COMPILED BY: LINUS BRAIN DELAVENUNYE (IMOLE), BSC ACCT, CA

c) Increasing public expenditure which in turn increases the level of employment.

Tools used by Government to Achieve Fiscal Policy

General Principles of Fiscal Policy (Sec 13)

Guiding Principles in Formulating and Implementing Fiscal Policy Objectives

COMPILED BY: LINUS BRAIN DELAVENUNYE (IMOLE), BSC ACCT, CA

e) Achieving efficiency, effectiveness and value for money in expenditure

Fiscal policy indicators (Sec.17)

Fiscal Strategy Document (Sec.15)

Participants in the budgeting process and their responsibilities

 Minister of Finance and the ministry

COMPILED BY: LINUS BRAIN DELAVENUNYE (IMOLE), BSC ACCT, CA

 Prepare draft consolidated budget and submit to cabinet for review

Empowering the public to get involved in budgeting

Empowering the public to get involved in budgeting includes:

COMPILED BY: LINUS BRAIN DELAVENUNYE (IMOLE), BSC ACCT, CA

Annual Budgeting Process/Ghana Budget Cycle

Ghana budget cycle

Key points on Ghana’s budget cycle

COMPILED BY: LINUS BRAIN DELAVENUNYE (IMOLE), BSC ACCT, CA

Expenditure budget, which details out all expenditures expected to be incurred by

Mechanisms to encourage public participation in budget formulation and

COMPILED BY: LINUS BRAIN DELAVENUNYE (IMOLE), BSC ACCT, CA

Mechanisms to encourage public participation in budget approval include:

COMPILED BY: LINUS BRAIN DELAVENUNYE (IMOLE), BSC ACCT, CA

Budget implementation does not happen automatically. It is an involved process that

Budget implementation cycle

The budget implementation cycle in Ghana consists of five main components.

Mechanisms to encourage public participation in budget implementation include:

COMPILED BY: LINUS BRAIN DELAVENUNYE (IMOLE), BSC ACCT, CA

5) Budget Monitoring, Evaluating and Reporting

Mechanisms to encourage public participation in budget monitoring and evaluation

Budget Management and Control Activities

COMPILED BY: LINUS BRAIN DELAVENUNYE (IMOLE), BSC ACCT, CA

Content of supplementary budget (FAR 173)

Events that may lead to preparation of supplementary budget (Causes)

Virements are processed on GIFIMIS.

COMPILED BY: LINUS BRAIN DELAVENUNYE (IMOLE), BSC ACCT, CA

TYPES OF BUDGET IN THE PUBLIC SECTOR

Ways of financing a deficit budget (deficit financing)

LOCAL GOVERNMENT BUDGETING

COMPILED BY: LINUS BRAIN DELAVENUNYE (IMOLE), BSC ACCT, CA

Three forms of administrative decentralisation:

COMPILED BY: LINUS BRAIN DELAVENUNYE (IMOLE), BSC ACCT, CA