Question 1 The first task of John Nyamah, a newly appointed Assistant Accountant of Azadagli Municipal Assembly, is to prepare the 2022 financial statements of the Assembly in compliance with the International Public Sector Accounting Standards (IPSAS), the Public Financial Management Act 2016 (Act 921) and the current Chart of Accounts of the Republic of Ghana. Nyamah submitted on 5th March 2023 the draft financial statements, presented below, to the Director of Finance for review. Statement of Financial Performance for 2022 Revenues Decentralised Transfers Internally generated fund Donation and grants Expenses Compensation for employees Goods and Services Capital Expenditure (CAPEX) Interest Subsidies Other expenditures Operational Deficit 1 2 3 300,000,000 4 100,000,000 5 600,000,000 40,000,000 2,000,000 13,000,000 500,000,000 280,000,000 125,000,000 905,000,000 1,055,000,000 (150,000,000) Statement of Financial Position 2022 Non-current asset Property plant and equipment Investment Current Asset Inventory Receivables Fixed Deposit Cash and Cash equivalent Liabilities and Fund 6055,000,000 55,000 137,000,000 137,055,000 100,000,000 (8,000,000) 92,000,000 Payables Bank Loans Funds Accumulated Fund Deficit (150,000,000) Page 1 of 10 30,000,000 67,000,000 15,000,000 25,000,000 36,000,000 64,000,000 142,000,000 Notes to the Financial Statements Notes 1: Decentralised Transfer District Assembly Common Fund Salary subventions District development facility Other grants Notes 2: Internally Generated Fund Licences Fees and Charges Rates Sanitation grant from the central government Investment Interest Rent Note 3: Donations Concerned Citizens Network made the donation to the Assembly Note 4: Compensation for employees Established post salaries Non-established post salaries Travel allowances Travel and Transport Assembly members sitting allowance Pensions Note 5: Use of goods and Services Car maintenance allowances Repairs and Maintenance Office expenses Computers for the Office Training, Seminars and Conferences Note 5: Capital Expenditure (CAPEX) Construction of new market Purchase of motor vehicles Access roads Furniture and refurbishment. Plant and Machinery 200,000,000 220,000,000 75,000,000 5,000,000 500,000,000 80,000,000 150,000,000 30,000,000 10,000,000 6,000,000 4,000,000 280,000,000 200,000,000 40,000,000 30,000,000 10,000,000 15,000,000 5,000,000 300,000,000 12,000,000 18,000,000 20,000,000 40,000,000 10,000,000 100,000,000 120,000,000 80,000,000 200,000,000 150,000,000 50,000,000 600,000,000 As a Senior Accountant of Azadagli Municipal Assembly, you are to review and provide recommendations for improvement to the financial statements. Required: a) Discuss the extent to which the financial statements presented comply with the components of financial statements required under IPSAS1: Presentation of Financial Statements. (10 marks) b) Discuss, with evidence, the extent to which the financial statements presented reflect the qualitative characteristics of general-purpose financial statements under Chapter 3 of Conceptual Framework of Financial Reporting in the Public Sector. (10 marks) c) Under no more than five headings (categories), discuss the shortcomings you have observed in the financial statements presented, if any. Note that you must categorise the observations. (10 marks) d) Provide recommendations for improvement based on your reviews. (5 marks) (Total: 35 marks) Question 2 Managing in Crisis The effect of the economic challenges of the nation will negatively impact government entities in the second half of 2023. A Principal Spending Officer of a public university, the University of Universal Studies (UUS), is so concerned about the ramifications of the fiscal crises of the country on the liquidity condition of the University. He wants to know how the situation will impact the cash condition of the university, therefore, has asked the Director of Finance to provide him with some information that will help to assess the cash flow of the entity and the way out if any challenge arises. The austerity policy of the government has ramifications for the management of UUS. First, the government intends to cut the quarterly subvention to the universities beginning from July 2023 by 40%. The subvention received for the second quarter of the year was GHc2,000,000. The cash advice for the payment of the subventions is usually in the second and third month of the quarter in the ratio of 1:3. Second, the university is required to start paying for its non-established salaries from July 2023. The non-established post salaries for the second quarter were GHc250,000, GHc300,000 and GHc320,000 for March, April and June respectively. The non-established post for July 2023 will be the same as for June but subsequently, the management of the university decides to lay off some casual workers, which will reduce the wage bill by 10% on a month-to- month basis. Note 6: Property Plant and Equipment Property, Plant and Equipment are accounted for in the Statement of Financial Performance. The economic crisis has also affected the internally generated fund of UUS. The students find it extremely difficult to honour their academic facility fees (AFUF) and residential facility user fees (RFUF). The projected fees for the second half of the year are as follows. July Aug Sept Oct Nov Dec GHc000 GHc000 GHc000 GHc GHc000 GHc000 AFUF 1,000 1,200 1,200 800 300 1,400 RFUF 1,500 1,600 1,600 1,800 1,600 1,400 Until recently, the University collected 90% of the fees due for each month. However, the hardship has affected the student's ability to pay AFAF promptly. It is estimated that only 50% of the AFUF will be collected for each month and the balance of 60% collected in the second month. RFUF are received as and when due, as students are made to pay before entry to the hotel facilities. At the end of June 2023, an amount of GHc4,000,000 was receivable from the students in respect of AFUF. It is projected that 50% will be collected in July and the rest collected in September 2023. The government has also asked all public universities, including UUS, to take responsibility for their utility bills from March 2023. The March, April and June Bills were GHc800,000, GHc820,000 and GHc840,000. Whilst the government has paid the March bill, the April and June bills will be honoured by UUS in July and August respectively. Concerning capital expenditure, the University has an outstanding payment to contractors amounting to GHc15,000,000, which is due for payment in August 2023. Additional GHc5,000,000 will be paid in October 2023. Other suppliers due for payment in the third quarter amounted to GHc3,200,000. The university will also foot the administrative cost, GHc1,200,000, for the third quarter. For the first time, the balance of UUS at the end of the second quarter dropped to as low as GHc700,000 OD. The information available is causing sleepless nights for the Principal Spending Officer. He fears UUS will face unbearable cash crises in the first three months of the austerity policy. He wants to know how the cash future of UUS will be under austerity to enable management fashion strategies to overcome the likely challenge. He challenged the Director of Finance to provide that prediction within 48 hours. Required: i) Discuss the practical possibility of the Director of Finance predicting the cash future of UUS under austerity and explain the appropriate financial statement that the Direct of Finance should prepare, if possible. (3 marks) ii) Prepare the statement you have recommended in question (i) above for the third quarter of the year, showing clearing the prediction for each month and the quarter as a whole. You are to disclose any additional assumptions that you have used in the preparation of the statement. (8 marks) iii) Recommend two appropriate cash management strategies to the management of UUS based on your result in question (ii). (2 marks) (Total: 13 marks) Question 3 The scenarios below border on the application of ethical principles of accountants in the public sector context. a) You are an Assistant Internal Audit Officer of a covered entity, and you have carried out an internal audit of some sensitive operations of the entity. The audit covers allowances and bonuses paid or due for payment to the Board Chairman and other members of the board of governors, including the Chief Executive Officer. The transactions and events smear profligacy and corruption, given the current financial difficulties that the entity faces. You took a snapshot of the audit evidence with your phone cameras and posted it on your old-school WhatsApp platform to buttress a claim of corruption you have made. This has attracted a lot of traffic to your post and one of the group members, who is a Journalist decided to spark a bigger debate on the matter in mainstream media. Your post became viral within 24 hours. b) In the early part of December 2022, your Municipal Assembly received an unplanned visitation of the top political masters, who claimed to be on a political campaign and have decided to pay a "courtesy call" on the Municipal Chief Executive and the Assembly. The Chief Executive quickly asked that a financial package (brown envelope) be prepared for them. The amount is quite significant but unbudgeted. The visitors left the Assembly with a high commendation from the Chief Executive. Thereafter, he asked the Director of Finance to process the necessary documentation to support the brown envelope transactions. The Director of Finance expressed some misgivings about the transactions but advised the Accountant to record the brown envelope transaction as goods and services under travel and transport, which he did without any objection. c) A Director of Finance of a covered entity has been at post for the last two years, and it has become an open secret in the entity that he does not know his job. Since his assumption, the entity has been not able to submit the required quarterly and annual public accounts to the Controller and Accountant General. Auditors always raised many audit observations indicting the entity for bad accounting. The financial records were in shamble, the financial statements were in disarray and the cash management was unfortunate. In fact, he secured the job based on his political activism rather than accounting professionalism. d) The Director of Finance was touted as the smartest accounting person in Ghana by the Chief Executive Officer of the entity. He claims that he always keeps his back and delivers him from the corrupt league of public officers. He brags: This my Director of Finance, I am yet to meet his kind of accountant. He understands the language, just discuss it with him and it is done. Whatever Required: you want. The guy is just smart of the smartest. Even Domelevo himself can audit him and the report will be clean. I just love this guy, because he just knows how to cook the books well. Discuss, for each of the scenarios (i) to (iv), one ethical code of professional accountants that has been breached and suggest a safeguard for each of them