Summary of Contents
1.1. FINAL ACCOUNTS OF THE GOVERNMENT
The final account of the government is known as the “public account.” Public accounts are documents and records pertaining to public and trust money received into, held in, and paid from the consolidated fund.
It is the responsibility of the CAG to compile public accounts of the consolidated fund and any other fund under his care. The CAG is also responsible for approving departmental accounting instructions, classifying accounts (chart of accounts), and making accounting policies for the public sector. Financial reporting is done monthly and annually, as required by law.
Read also: FORENSIC ACCOUNTING IN THE PUBLIC SECTOR
Act 654 states that the controller and accountant general are responsible for maintaining the accounts. As mandated by law, public accounts are prepared on a monthly and annual basis.
1.1.1. MONTHLY STATEMENT OF PUBLIC ACCOUNTS
Within a period of fifteen days, or a period as Parliament may by resolution appoint, after the end of each month, the controller and accountant general shall prepare and transmit for publication in the Gazette, which shall consist of:
- A statement of financial position showing the assets and liabilities of the consolidated fund as of the end of the month
- A statement of revenue and expenditure of the consolidated fund for the month
- A statement of receipt into and payment from the consolidated fund for the month and for the financial year up to the end of that month as compared with the budgetary estimates for the year
- A statement of revenue and expenditure of retained internally generated funds by the departments
- Cash flow statement of the consolidated fund for the month
- Notes that form part of the accounts
1.1.2. ANNUAL STATEMENT OF PUBLIC ACCOUNTS
Within a period of three months, or a period as Parliament may by resolution appoint, after the end of each financial year, the controller and accountant general will prepare and transmit to the Auditor General and Minister, in respect of the financial year, the public accounts, which comprise:
- A statement of financial assets and liabilities of the consolidated fund as at the end of the year, annotated with such qualifying information as may affect the significance of the figures shown in the statement;
- A summary statement of the receipt into and payment from the consolidated fund in comparison with the budget summary for the financial year
- A statement of revenue and expenditure for the consolidated fund for the year.
- Statement of transactions during the year and an analysis of the position at the end of the year for;
- Public Debt
- Deposit and other trust money
- The security of the government
- Public loan
- Equity investment of the consolidated fund
- A Cash Flow of the Consolidated Fund for the Year
- Any other statement as required by any enactment
- notes that form part of the accounts.
The accounts submitted are prepared in accordance with generally accepted accounting principles (such as the IPSASs) and in accordance with any instructions issued by the controller and accountant-general in consultation with the auditor-general, state the basis of accounting used in the preparation, and identify any significant departures and the reasons for the departure.
1.2. CLOSURE OF ACCOUNTS
At the close of business on the last working day of each month or financial year, whichever is applicable, the accounts should be balanced.
The receipts and payments that belong to a period or a financial year other than the period or financial year in question will be shown in the accounts, and the details will be given in the notes.
1.3. FINANCIAL YEAR
The financial year of the government of Ghana extends from the first day of January until the thirty-first day of December of each year. But in other countries like India, Nigeria, Kenya, the United States of America, the United Kingdom, and others, the countries may be different.
1.4. IPSAS 1: PRESENTATION OF FINANCIAL STATEMENTS
1.4.1. PURPOSE OF FINANCIAL STATEMENTS IN PUBLIC SECTOR
Financial statements are a structured representation of the financial position and financial performance of an entity.
The objectives of financial statements are to provide information about the financial position, financial performance, and cash flows of an entity that is useful to a wide range of users in making and evaluating decisions about the allocation of resources.
1.4.2. COMPONENT OF FINANCIAL STATEMENT
A complete set of financial statements of a public sector organization comprises of;
- Statement of financial position
- Statement of financial performance
- Statement of changes in net assets/equity (residual interest in asset less liabilities)
- Cash flow statement
- When the entity makes it approved budget publicly available, a comparison of budget and accrual amounts.
- Notes, comprising a summary of significant accounting policies and other explanatory notes
1.4.3. FAIR PRESENTATION AND COMPLIANCE WITH IPSASs
- Financial statements present faithfully the effects of transactions, and other events and comply with applicable IPSASs. In this case presumed to result in financial statements that achieve a fair presentation.
- An entity whose financial statements comply with IPSAS shall make an explicit and unserved statement of such compliance in the notes. Financial statements shall not be described as complying with IPSAS unless they comply with all the requirements of IPSAS
1.4.4. FUNDAMENTAL PRINCIPLES OF FINANCIAL STATEMENT
- Fundamental principles underlying the preparation of financial statements are the going concern assumption, consistency of presentation and classification, accrual basis of accounting, and aggregation and materiality.
- Assets and liabilities, and revenue and expenses, may not be offset unless offsetting is permitted and required by another IPSAS.
1.4.5. COMPARATIVE INFORMATION
Comparative prior-period information should be presented for all amounts shown in the financial statements and notes.
Comparative information should be included when it is relevant to an understanding of the current period’s financial statement. In case of presentation or classification, any reclassification shall be disclosed.
1.4.6. REPORTING PERIOD
Financial statements generally are to be prepared annually. If the date of the year-end changes, and financial statements are presented for a period other than one year, disclosure and reason thereof is required.
1.4.7. CURRENT/NON-CURRENT DISTINCTION
Current/no-current distinction for assets and liabilities is normally required, an entity discloses for each asset and liabilities item that combines amounts expected to be recovered or settled both before and after 12 months from the reporting date, the amount to be recovered or settled after more than 12 months.
1.4.8. DISCLOSURE REQUIREMENTS
IPSAS 1 specifies minimum disclosure requirements for the notes. These shall include information about:
- Accounting policies followed
- The judgments that management has made in the process of applying the entity’s accounting policies have the most significant effect on the amounts recognized in the financial statements.
- The key assumptions concerning the future, and other key sources of estimation uncertainty, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
- The domicile and legal form of the entity
- A description of the nature of the entity’s operations
- A reference to the relevant legislation
- The name of the controlling entity and the ultimate controlling entity of the economic entity.
1.5. IPSAS 3: ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATED AND ERRORS
1.5.1. OBJECTIVE OF IPSAS 3
To prescribe the criteria for selecting and changing accounting policies, together with the accounting treatment and disclosure of changes in accounting policies, changes in estimates, and corrections of errors.
1.5.2. ACCOUNTING POLICIES
- Accounting policies are the specific principles, bases, conventions, rules, and practices applied by an entity in preparing and presenting financial statements.
- In selecting and applying accounting policy by a government entity, IPSAS 3 prescribes the following hierarchy:
- Where IPSAS applies to a transaction, the accounting policy is determined by applying IPSAS.
- Where no IPSAS applies, management should use its judgment, considering the requirements of IPSASs dealing with similar and related issues and the definition of the financial statement elements.
- Management may consider recent pronouncements of other standard-setting bodies (such as IASB0) and accepted public and private sector practices.
- Once an accounting policy is selected, it should be applied consistently to similar transactions.
- Accounting policy cannot be changed except if it is required by an IPSAS or if it results in reliable and more relevant information.
- When there is a change in accounting policy, the new policy should be applied retrospectively by restating prior periods. If restatements are impracticable, include the cumulative effect of the change in net assets or equity. If the cumulative effect cannot be determined, apply the new policy prospectively.
1.5.3. CHANGES IN ACCOUNTING ESTIMATES
- An accounting estimate is a monetary amount in the financial statement determined based on management judgments using the latest available and reliable information.
- Examples of accounting estimates are estimated tax revenue, doubtful debts provision on uncollectible tax, inventory obsolescence, the fair value of financial assets or financial liabilities, useful lives of assets, warranty obligations, etc.
- Changes in accounting estimated involve adjustment to the carrying value of an asset or liabilities and should be accounted for in the current period, future periods, or both (no restatement)
1.5.4. PRIOR PERIOD ERROR
- These are errors discovered during a current period that relate to a prior period. Such errors include the effects of mathematical mistakes, mistakes in applying accounting policies, oversights or misinterpretations of facts, and fraud.
- All material errors should be corrected by restating comparative prior period amounts, and if the error occurred before the earliest period presented, by restating the opening statement of financial position.