CHAPTER 1: PUBLIC FINANCIAL MANAGEMENT CYCLE

Question 1

Meaning of public sector

Answer 1

Entities established by law to meet the public interest without a profit motive.
Comprises: central government, local government and all publicly owned, controlled or funded entities.

Question 2

Types of public sector entities

Answer 2

-Central government
-Ministries, Departments and Agencies
-Metropolitan, Municipal and District Assemblies
-Statutory Corporations
-Parastatal Organisations

Question 3

Characteristics of Public sector organisations

Answer 3

-established to meet interest of the public without profit motive
-enjoy legal monopoly derived from laws establishing them
-largely financed by government
-performance measures are non financial (Economy, efficiency, effectiveness)
-different accounting framework
-high level of stewardship and accountability required
-wider group of stakeholders (international donors, civil society, media, social commentators, etc.
-financial and operational decisions are influenced by political considerations
-established by the constitution, acts of parliament and legislative instruments. Thus they are strictly regulated.

Question 4

Objectives of public sector entities

Answer 4

=To fulfil the legal requirements contained in laws that established them.
=To provide basic goods and service to all citizenry
=To provide services that are not provided by the private sector and can be economically provided by a centrally planned organisation for the citizens.
=To create and maintain economic and social infrastructure within the country and provide a benefit to everyone within socially acceptable norms.
=To correct inequalities that exist among different groups within the economy
=To provide information for measuring financial performance of entities in terms of economy, efficiency and effectiveness

Question 5

Methods of classifying public entities

Answer 5

-by mode of finance
-by power and nature of operations

Question 6

Classes of public sector entities

-Mode of finance

Answer 6

Ordinary entities - funded wholly by national budget through the consolidated fund. (No IGF allowed). Eg police, military

Subvented entities - funded partly from government (subvention) and partly from their IGF. Eg MMDA’s, Universities, Hospitals

Self-funding entities - Do not rely on continuous funding of the government from the national budget. eg Government Business Entities and statutory Boards

Question 7

Classes of public sector entities

Power and nature of operations

Answer 7

=Central Government Entities - central admin structures for implementing government policies and programs. Eg legislature, Judiciary,MDA’s
=Local Government Entities - They ensure local level and sub-national development. Eg MMDA’s, Regional coordinating councils
=Statutory Bodies and Autonomous Agencies-special purpose entities eg Educational institutions, research institutions, public corporations like FDA
=State owned enterprises-established under companies act with a profit motive - Ghana water company, ECG
=Government Business Enterprises - Trading enterprises wholly or partially owned by the state. Wholly or partially independent and so financial reporting is by IFRS. Operate like private sector entities.

Question 8

Features of Government Business Enterprises

Answer 8

-power to contract in its own name
-Have been assigned the financial and operational authority to carry on a business
-Sells goods and services in the normal course of business to other entities at full cost recovery or at a profit
-are not reliant on continuing government funding to be a going concern (other than purchase of output at an arm’s length)
Ultimately controlled by a public sector entity.

Question 9

Differences between public sector and private sector entities

Answer 9

=Primary motive (Public interest vrs profit)

=Means of funding (Public resources vrs capital contribution of owners)

=Stakeholders (multiple vrs limited)

=Accountability and stewardship (to citizens through parliament vrs to shareholders and regulators)

=Political environment (heavy political influence vrs heavy economic influence)

=Performance measurement (subjective measures 3E’s vrs Objective measure Profitability)

=Legislative compliance = (increased exposure to legislative exposure vrs limited exposure to legislative compliance)

Question 10

Similarities between public sector and private sector

Answer 10

Both exist to provide goods and services

Both require financial resources to carry out their objectives

Both must account for their stewardship to the differing stakeholders

Both need to achieve efficiency and effectiveness in the utilization of their resources

Both are expected to be socially responsible

Question 11

Definition of Public Financial management

Answer 11

The processes involved in managing public financial resources and the results derived from those processes.

Planning, controlling, implementing and monitoring fiscal policies and activities including reporting, auditing and the exercise of oversight responsibilities on the management of public funds

Question 12

Elements of a sound Public Financial Management System

Answer 12

-Budget Formulation
-Budget Authorisation and Approval
-Budget Execution
-Accounting and Reporting
-Monitoring and oversight

Question 13

Legislative sources for public financial management

Answer 13

1992 constitution chapter 4 - Foundation and conceptualization of the public sector

Public Procurement Act 2003 (Act 663) as amended by Act 2016 (Act 914) -rules for public procurement of goods, works and services

PFM Act 2016 (Act 921) and its Regulation 2019 (LI 2378) - legislative framework for public financial management