Question 1

(a) The Uganda Public Finance Management Act, 2015 requires that the

national budget and work plans for public organisations are approved by

Parliament by 31 May every year and budget execution commences on 1

July. Business organisations, on the other hand, are not required to

comply with the provisions of the Act.

Required:

(i) Contrast financial management in public and business organisations.

(5 marks)

(ii) Discuss the following as provided for in the Public Finance

Management Act, 2015:

Powers of the Secretary to the treasury. (4 marks)

Responsibilities of the Accountant General. (5 marks)

Delegation of a function or responsibility by an accounting

officer.

(3 marks)

(b) Mosada district has been experiencing rising cases of a rare condition for

the last three years which has led to the death of several youths. The cost

of treatment of this condition is very high in Uganda. The Council

discussed the issue of purchasing the drugs from abroad during the debate

of the budget of the financial year 2016/2017. During the debate, the

Council authorised the Chief Administrative Officer (CAO) to acquire a

manufacturing company abroad in order to minimise the cost of treatment.

The CAO paid Shs 500 million to acquire 75% of shares in Lo Ping, a

Kwairian drug manufacturing company on 1 July, 2016 when its

accumulated surplus was kwasas 134,000. However, the Council disposed

of its shares in Lo Ping on 31 March, 2017 after the Kwairian government

enacted a law which prevents foreign ownership of its companies. The

company was disposed of at Shs 650 million. Though the account for the

money received was opened, the transaction was never recognised.

The balance on the accumulated surplus of Lo Ping at the beginning of the

financial year was kwasas 134,000.

The statements of the financial position of the district and the company as

at 30 June, 2017 are as follows:

Masonda District Lo Pig

Shs '000' Kwasas

Assets:

Current assets:

Cash & cash equivalents 760,000 25,000

Receivables 560,490 40,000

Inventory 620,888 23,000

Prepayments 356,800 30,000

Total current assets 2,298,178 118,000

Non-current assets:

Receivables 567,400 10,000

Investment Lo ping 500,000 -

Infrastructure, plant and equipment 453,100 150,000

Land and buildings 6,650,000 210,000

Total non-current assets 8,170,500 370,000

Total assets 10,468,678 488,000

Liabilities:

Current liabilities:

Payables 4,050,000 18,000

Employee benefits 810,000 -

Total current liabilities 4,860,000 18,000

Non-current liabilities:

Payables 24,570 33,000

Long-term borrowing 457,000 200,000

Total current liabilities 481,570 233,000

Total liabilities 5,341,570 251,000

Net assets/ equity

Accumulated surplus 5,127,108 137,000

Share capital - 100,000

Total net assets/ equity 5,127,108 237,000

Total net assets/ equity & liabilities 10,468,678 488,000

Additional information:

1. The district complies with the provisions of the International Public Sector

Accounting Standards (IPSAS).

2. The district received 20,000 doses of drugs for the treatment of the rare

condition from UNICEF on 1 October, 2016 and immediately distributed

them to the health centres. Each dose was valued at USD 3. The council

did not recognise the drugs in its books of account.

3. The closing balance on the employee benefit account reported by the

district was actually the opening balance. You have established that the

correct closing balance is Shs 500 million. The balance on the employee

benefit account relates to outstanding wages of employees.

4. The district received 5 graders at a cost of USD 400,000 from the Federal

Republic of Aruantan as a 2% loan for road maintenance on 1 August,

2016. The district is required to start repaying the loan in 5 years' time.

The district paid the interest up to the end of the financial year. The

policy of the district is to depreciate graders at 20% per annum on a

reducing balance basis. These transactions have not been recorded in the

district's books of account.

5. The closing balance on the current receivables reported by the district in

its final accounts was actually its opening balance. You have established

that the correct closing balance is Shs 200 million. Current receivables

relate to outstanding taxes.

6. The district Senior Accountant prepared its statement of financial

performance based on revenue receipts and payments.

7. The district budget for the financial year ended 30 June, 2017 was as

follows:

Revenue: Shs '000'

Taxes 8,000,000

Fees, fines, penalties & licenses 4,590,000

Revenue from exchange transactions 2,400,840

Transfers from other Government entities 16,000,000

Other revenue 4,507,000

Total revenue 35,497,840

Expenses:

Wages, salaries & employment benefits 13,565,000

Grants transfer and other payments 19,500,000

Supplies consumed 450,000

Depreciation expenses 820,000

Other expenses 78,000

Finance cost 1,084,840

Total expenses 35,497,840

correct closing balance is Shs 500 million. The balance on the employee

benefit account relates to outstanding wages of employees.

4. The district received 5 graders at a cost of USD 400,000 from the Federal

Republic of Aruantan as a 2% loan for road maintenance on 1 August,

2016. The district is required to start repaying the loan in 5 years' time.

The district paid the interest up to the end of the financial year. The

policy of the district is to depreciate graders at 20% per annum on a

reducing balance basis. These transactions have not been recorded in the

district's books of account.

5. The closing balance on the current receivables reported by the district in

its final accounts was actually its opening balance. You have established

that the correct closing balance is Shs 200 million. Current receivables

relate to outstanding taxes.

6. The district Senior Accountant prepared its statement of financial

performance based on revenue receipts and payments.

7. The district budget for the financial year ended 30 June, 2017 was as

follows:

Revenue: Shs '000'

Taxes 8,000,000

Fees, fines, penalties & licenses 4,590,000

Revenue from exchange transactions 2,400,840

Transfers from other Government entities 16,000,000

Other revenue 4,507,000

Total revenue 35,497,840

Expenses:

Wages, salaries & employment benefits 13,565,000

Grants transfer and other payments 19,500,000

Supplies consumed 450,000

Depreciation expenses 820,000

Other expenses 78,000

Finance cost 1,084,840

Total expenses 35,497,840

8. The district's cash receipts and payments during the financial year were as

follows:

Revenue collected Shs '000'

Taxes 7,800,000

Fees, fines, penalties & licenses 5,000,000

Revenue from exchange transactions 2,300,000

Transfers from other Government entities 14,500,000

Other revenue 3,700,000

Expenses paid:

Acquisition of Lo Ping 500,000

Wages, salaries & employment benefits 12,098,730

Grants transfer & other payments 17,300,000

Supplies consumed 400,000

Depreciation expenses 897,400

Other expenses 674,000

Finance cost 1,400,000

9 Lo Ping's statement of financial performance for the financial year ended

30 June, 2017 was as follows:

Kwasas

Revenue from exchange transactions 750,000

Other revenue 340,000

Total revenue 1,090,000

Expenses:

Wages, salaries & employment benefits 700,000

Supplies consumed 250,000

Depreciation expenses 75,000

Other expenses 35,000

Finance cost 27,000

Total expenses 1,087,000

Surplus/ deficit 3,000

10. The exchange rates are as follows:

Date 1 USD to Shs 1 Kwasa to Shs

1 July, 2016 3,000 250

1 August, 2016 3,020 300

1 October, 2016 3,700 330

1 March, 2017 3,500 295

30 June, 2017 3,400 297

Average rate 3,520 295

Required:

(i) Prepare consolidated statement of financial performance of the district

for the year ended 30 June, 2017 in accordance with IPSAS 24:

Presentation of Budget Information in Financial Statements.

(23 marks)

(ii) Prepare consolidated statement of financial position of the district as at

30 June, 2017.

(10 marks)

(Total 50 marks)

SECTION B

Attempt two of the four questions in this section

Question 2

(a) Kiira Public University is constructing a building expected to take 24

months to complete. The University began construction on 1 January,

2017 with the following payments made during the year:

Shs 'million'

31 January 400

31 March 900

July 200

30 September 400

30 November 500

The following borrowings were outstanding at the reporting date 31

December, 2017:

Shs 'million'

Bank loan (description below) 1,600

15% debenture dated 1 January, 2016 repayable 2019 400

10% 8-year note dated 1 September, 2012, with simple

interest payable annually on 31 December 2,400

The first payment on 31 January was funded from the University's existing

borrowings. However, the University succeeded in raising a bank loan for

an amount of Shs 1,600 million on 31 March, 2017 at a simple interest of

8% per annum, calculated and payable monthly in arrears. These funds

were specifically used for this construction. Excess funds were temporarily

invested at 5% per annum receivable monthly in arrears, in cash. The

pool of borrowings was again used for a Shs 400 million payment on 30

November, which could not be funded from the bank loan. Construction of

the building was temporarily halted for two weeks in June, when

substantial administrative and technical work was carried out.

Required:

(i) Determine the borrowing costs which can be capitalised in respect of

the building referred to above for the year ended 31 December,

2017.

(9 marks)

(ii) Discuss the recognition, commencement, and cessation of

capitalisation of borrowing costs according to IPSAS 5: Borrowing

Costs.

(6 marks)

(b) IPSAS 28: Financial Instruments: Presentation sets out the principles for

presenting financial instruments as liabilities or net assets and for

offsetting financial assets and financial liabilities.

Required:

(i) Discuss the difference between a 'financial asset' and a 'financial

liability'.

(6 marks)

(ii) Explain a 'puttable instrument', and discuss the circumstances under

which a financial asset and a financial liability shall be offset.

(4 marks)

Question 3

(a) The following statement of the financial position is for the Ministry of

Health as at 30 June, 2017.

Assets: Shs '000'

Current assets:

Cash 525,000

Receivables 76,407

Inventory 8,500,000

Total current assets 9,101,407

Non-current assets:

Bearer biological assets:

Dairy livestock-immature 50,000

Dairy livestock-mature 200,000

250,000

Properly, plant and equipment 25,000,000

Total non-current assets 25,250,000

Total assets 34,351,407

Liabilities:

Current liabilities:

Payables 120,000

Total current liabilities 120,000

Non-current liabilities:

Loan 20,000,000

Total non-current liabilities 20,000,000

Total liabilities 20,120,000

Net assets/ equity:

Accumulated surplus 14,231,407

Total net assets/ equity 14,231,407

Total net assets/ equity & liabilities 34,351,407

Additional information:

1. The Ministry manufactures a drug for treating the ZIKIV virus for

sale to the pharmacies in the country on a commercial basis. On 1

July, 2016 there were 5 million tablets of this drug which were

valued at Shs 2.5 billion. The Ministry borrowed Shs 20 billion at an

interest rate of 5% from Geode Commercial Bank specifically to

manufacture the drug. The loan was wholly used for the

manufacture of the drug during the financial year. The Ministry did

not use any other source of funds for manufacturing the drug. Each

tablet of the drug was manufactured at Shs 500. The

manufacturing system is so efficient that no loss of materials was 6. The Ministry policy is to prepare its financial statements using

accrual basis of accounting in accordance with the IPSAS.

Required:

Redraft the Ministry's statement of financial position as at 30 June,

2017 taking into account the transactions mentioned above.

(20 marks)

(b) Describe the term 'segment reporting, as applied under IPSAS 22:

Disclosure of Financial Information about the General Government Sector.

(5 marks)

(Total 25 marks)

Question 4

The National Data Management Agency, a Government owned organisation has a

procurement and disposal unit under the department of finance and

administration. Most employees in each department raise requisitions to procure

goods and services in piecemeal as and when the need arises. The method of

procurement usually used by this Agency is direct procurement irrespective of

the procurement value, and most staff are unbothered about value for money as

demonstrated by hardly any price comparison since no more than one quotation

is obtained. This was one of the issues raised by Auditor General in the recent

audit particularly raising a red flag on lack of proper procurement planning and

non-compliance to the Public Procurement and Disposal of Public Assets Act

(PPDA) Act, 2003. Other issues raised included incidences where employees in

the Agency have freely and directly participated as bidders. The Agency

employees have also been involved in direct negotiations with contractors on

prices.

Required:

With reference to the PPDA Act, 2003 and the PPDA Regulations, 2014:

(a) Discuss the main considerations in planning procurement requirements by

a procuring and disposing entity. (10 marks)

(b) Explain the conditions for use of 'sale to public officers' as a method for

disposal of a public asset. (4 marks)

(c) Discuss the powers of the user department in exercising its functions in

the public procurement and disposal process. (5 marks)

(d) Describe the circumstances under which a procurement and disposal entity

(PDE) is permitted to have price negotiations with a contractor in case the

best evaluated bid or proposal exceeds the budget of the PDE.

(2 marks)

(e) Discuss the circumstances under which the direct procurement method can

be used. (4 marks)

Question 5

(a) Government of Uganda (GoU) recently introduced the e-cash platform as

an alternative payment system to the Integrated Financial Management

System (IFMS). You are the Finance Manager of the Uganda Road

Maintenance Authority. Following a one-day workshop you attended at

the Ministry of Finance about the e-cash platform solution, you have been

asked by your supervisor to train accounts and finance staff in all

upcountry stations about this new payments system.

Required:

Prepare set of notes to be used in the training, discussing the following

aspects:

(i) Meaning and objectives of the e-cash platform.

(ii) Transactions to be covered under the e-cash payment system.

(iii) The process of handling e-cash transactions.

(15 marks)

(b) The objective of the Government, when setting fiscal objectives within the

macroeconomic framework, shall be to ensure macroeconomic stability and

economic growth having regard to the National Development Plan. The

fiscal objectives shall be based on certain principles.

(Source: The Public Finance Management Act, 2015).

Required:

Discuss any four principles Government should follow in setting fiscal

objectives within the macroeconomic framework.

(8 marks)

(c) Tyrad District Local Government has been handling cases of property of

the deceased persons in a bid to reduce conflicts in the communities.

Slandriate (the transferor), a 19 year old citizen is an orphan who wants to

fly to America. His aunt lives there and has invited him for a job. He has

made a will and named Tyrad District Local Government as a primary

beneficiary since he trusts no one in his parental linage. He has entrusted

a 2 star hotel worth Shs 800 million to the district.

Required:

Describe the accounting treatment of the 2 star hotel in the books of the

district local government guided by IPSAS 23 (Revenue from Non-

Exchange Transactions (Taxes & Transfers).