You are presented below two separate sets (Set A and Set B) of financial statements of Department of Social Welfare for the year 2019 using different accounting bases. SET A Department of Social Welfare Statement of Receipt and Payment for the year ended 31st December 2019 Notes GHc'000 GHc'000 Receipts Budget allocation 1 12,000 Internally Generated Fund 2 6,000 Donations 3 1,000 19,000 Payments Compensation of employees 4 7,000 Goods and services 5 4,000 Purchase of fixed assets 6 10,000 Other expenditures 7 500 21,500 Deficit (2,500) Notes to the accounts 1. The amount represents the total appropriation released to the Department for the financial year. This constituted 85% of the budget approved for the Department for the period. 2. Internally generated revenues are received from fees and other user charges of the Department. 3. Donation represents amount received in cash from donor support during the year. 4. This represents the total emoluments, allowances and other benefits paid to the employees of the Department. 5. Goods and services consist of amount paid for general administration and provision of public services. 6. Fixed assets bought and paid for during the year 7. Other expenses represent unclassified expenses paid. Page 3 of 5 SET B Department of Social Welfare Statement of Financial Position as at 31st December 2019 Notes GHc'000 Assets Motor vehicle 8 9,000 Revenue Receivable 9 3,500 Cash 10 1,500 14,000 Liabilities and Fund Payables 11 4,700 Accumulated Fund 12 9,300 14,000 Notes to the financial statement 1. Note 1-5 relates to same items explain in Statement A, but accounting policies may differ. 6. Consumption of fixed assets is charged at the rate of 10% per annum. 7. Same as previous. 8. Motor vehicle is reported at carrying amount. 9. This are revenues earned but not yet received by the Department. 10. Cash is made up of current cash surplus and previous years balance. 11. These are accrued expenses of the year. 12. The represent the accumulated fund balance of the year. Department of Social Welfare Statement of Revenue and Expenditure for the year ended 31st December 2019 Notes GHc'000 GHc'000 Revenue Budget allocation 1 12,000 Internally Generated Fund 2 9,300 Donations 3 1,200 22,500 Expenses Compensation of employees 4 8,700 Goods and services 5 6,000 Consumption of fixed assets 6 1,000 Other expenditures 7 1,500 17,200 Surplus 5,300 Page 4 of 5 Required: Study the two sets of financial statement critically and provide answers to the questions that follow. a) Identify and explain the accounting bases applied in preparing financial statements in Set A and Set B respectively. [5 marks] b) Discuss four (4) differences you have observed in the two sets of financial statements, A and B. Ignore differences in amounts. [6 marks] c) Explain the reasons why the amounts reported in the two sets of financial statements for the following items differ, given that the information relates to the same Department for the same period: i) Internally generated fund ii) Donations iii) Compensation for employees iv) Goods and services v) Other expenses [10 marks] d) Explain the rationale for including consumption of fixed asset in the expenses of the Department under Set B. [2 marks] e) Explain how the amount of each item in the Statement of Financial Position was arrived in set B. [5 marks] f) Using an appropriate framework or criteria, evaluate the quality of the financial statements in Set B. [12 marks] [Total = 40 marks] Question 2 (optional) Public financial management is critical in achieving aggregate fiscal discipline, strategic allocation of resources and efficient service delivery in any economy. In reference to the Public Expenditure and Financial Accountability (PEFA) framework, discuss the above statement. [ 20 marks] Page 5 of 5 Question 3 (optional) a) Explain how each of these policy proposals of a government will affect the fiscal balance and the public debt of the country in the fiscal year. i) In 2021, all personal income taxes on employment, investment and trade will be abolished so that no individual person pays tax on income from employment, investment and trade. ii) The government from 2021 will pay unemployment allowance not less than GHc1000 to every unemployed person in Ghana. There will be no increase in taxes during the year. iii) Education at the tertiary level will be completely free from 2021. All fees will be absorbed by the government and pay from the Consolidated Fund. iv) All forms of importation will be banned from 2021 in pursuance of domestication agenda of government. [10 marks] b) The information below relates to the commitment, expenditure and the appropriations of a government department. Study the data carefully and answer the questions that follow. Date References Encumbrances Expenditures Appropriation Dr. Cr. Open Dr. To date Cr. Balance GHc GHc GHC GHC GHC GHC GHC 03/01/2020 Warrant received 100,000 100,000 04/01/2020 Purchase order- consumable 10,000 10,000 90,000 05/01/2020 Purchase order- publications 2,000 12,000 88,000 10/01/2020 Service order - Aircons 5,000 17,000 83,000 13/01/2020 Invoice for consumables 10,000 7,000 10,100 10,100 82,900 16/01/2020 Conference reservation 15,000 22,000 10,100 67,900 17/01/2020 Invoice for publications 2,000 20,000 2,000 12,100 67,900 20/01/2020 Bill- Conference 15,000 5,000 15,000 27,100 67,900 30/01/2020 Purchase order - computers 35,000 40,000 27,100 32,900 Required: i) Explain the usefulness of the statement provided above in public financial management. [4 marks] ii) Narrate the transaction that took place on 03/01/2020 [2 marks iii) Deduce and explain the following amounts: Total amount committed for the month of January Discharged commitment as at 10/01/2020 Uncommitted funds as at 20/01/2020. Committed funds as 17/01/2020