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Ghana Quality Authority (GQA) is an autonomous agency of government responsible for ensuring high quality standards of foods, drugs and other consumables in the country.

Ghana Quality Authority (GQA) is an autonomous agency of government responsible for ensuring high quality standards of foods, drugs and other consumables in the country. The governing council of GQA, in its recent meeting, has considered its financial statements for approval for publication. Unfortunately, the financial statements were torn to pieces by the board members for the reasons that it lacks quality and cannot fly in the face of the International Public Sector Accounting Standards (IPSAS). The Council Chairman was surprised that the financial statements are not accompanied by detail notes to the accounts. Looking at the face of the financial statements, I can say that it is not prepared on accrual basis, the Chairman stresses. The Board anonymously rejected the financial statements and instructed the Director of Finance to resubmit proper financial statements within two weeks, else he will be shown the door.

The Board takes the view that the financial statement is not reflective of the transactions and events that occurred during the year. For example, it was found that the internally generated funds (IGFs) of Authority reported was too low, GH 15,000,000 but the Director of Finance defends IGFs are disclosed only when cash is received and it is low because revenue from testing are mostly received in arrears. The compensation for employees shown in the financial statement is only GH20,000,000, which is not reflective of the rising employee pays due to promotions and new recruitment. Goods and Services was GH8,000,000 and this is also found to be under disclosed as several bills were outstanding at the end of that year. Surprisingly, all the capital expenditures for the year have been expensed in the year therefore resulting in a huge operational deficit. The assets acquired during the year amounted to GH35,000,000 and average useful life of the assets acquired during the year was 5 years. The GoG subvention received for the year amounted to GH29,000,000 and this was duly disclosed. The budget statement of the year showed the following variances:

GH000

Compensation for employees (10,000)

Goods and Services (2,710)

Capital expenditure 15,000

IGF (2,000)

GOG subvention (9,000)

The Director of Finance, after the meeting, retrieved the following additional information which was not considered in the initial financial statements:

  1. A pharmaceutical company, a major client of GQA, has paid quality assurance fees of GH3,000,000 for services to be provided to them in the following year, 2021,
  2. iTesting fees amounting to GH9,000,000 was conducted during the year but the clients are yet to pay the balances.
  3. Government promises to release further GH4,000,000 before the end of the year but could not keep the promise.
  4. Donation of Testing Equipment by DASA to the GQA was valued at GH1,200,000. The testing equipment has not been disclosed in the capital expenditure of the year.
  5. The salaries of 5 employees appointed on 1 November 2020 remained unpaid. The annual pay for each employee is GH36,000,000.
  6. Salary advanced of GH800,000 was granted to employees during the year.
  7. Inventory of consumables costing GH890,000 has net replacement cost of GH920,000 at the end of the year.
  8. Utilities consumed during the year without settling the bill amounted to GH600,000.

Required:

a) Based on the additional information provided by the Director of Finance and other information in the case, re-prepare in compliance with the International Pubic Sector Accounting Standards (IPSAS) and the Public Financial Management Act 2016, Act 921:

i) Statement of Financial Performance for the year ended 31 December 2020

ii) Statement of Financial Position as at 31 December 2020

iii) Cash Flow Statement for the year ended 31 December 2020

iv) Notes to the Financial Statements.

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