PSAF REVISION DAY 4

QUESTION 1
a. Identify FIVE functions of the Officer Controlling Expenditures as prescribed in Government Financial
Regulations (2009 Edition) (5 Marks)

b. Records from the Office of the Accountant General of the Federal Democratic Republic of Naija for the
year ended December 31, 2015 stated the following

REVENUE/EXPENDITURE 2015 2014

(N Million) (N Million)

Value Added Tax receipts 1,721,250 1,647,000

Miscellaneous Revenue 281,250 318,750

Personal Income Tax – Direct Tax 7,875,000 5,400,000

Allocation of Collection Costs

(FIRS and Customs) 2,306,250 2,478,750

Personnel Costs 5,400,000 7,200,000

Share of Statutory Allocation 10,125,000 6,337,500

CRF Charges 1,687,500 2,812,500

Grants and Subvention from Foreign donors 56,250 65,250

Rent from Government Properties 213,750 221,250

Overhead charges 1,125,000 900,000

MDAs Subvention 1,350,000 1,425,000

Sales of Government Properties 281,250 363,750

Loans Repayments 652,500 182,250

Purchases and reconstruction of Non-Current Assets 1,875,000 2,025,000

Proceeds from sales of Federal Government Properties 787,500 -

Purchase of Market securities 375,000 225,000

Cash and Cash equivalent (January 1, 2015 2,812,500 -

Proceeds from Loans and other borrowings 2,250,000 750,000

Cash and Cash equivalent (December 31, 2015) 16,245,000 2,812,50

Required:

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Prepare a Cash Flow Statement for year ended December 31, 2015 using Direct Method (Show
Comparative Figures). (15 Marks) · (Total 20 Marks)

QUESTION 2
a. According to IPSAS 25 on Employee Benefit, an entity shall disclose information that enables users of
financial statements to evaluate the nature of its defined benefit plans and the financial effect of changes in
those plans during the period.
You are required to write briefly on
i. Distinctions between defined contribution plans and defined benefit plans; (5 marks)
ii. Qualifying insurance policy (5 Marks)
b. i. Identify the four major categories for each of the federal government expenditure and revenue in Nigeria.
(6 Marks)
ii. Explain briefly the difference between government purchases and government transfer payments. (4 Marks)
(Total 20 Marks)
QUESTION 3
The Atlantic Staff Housing Corporation is preparing its budget for 2015. You have been engaged as a
Consultant to the Corporation to assist in the preparation of the budget. The following information have been
made available:
(i) The total annual subventions from the Federal Government in 2014 was N36,000,000. There is expectation
that this amount will increase by 10% in year 2015. The expected 10% increase will be received in the first six
months of the year along with the normal monthly allocations.
(ii) The management has decided to reduce transport and travelling by 5% in year 2015. The total amount in
2014 was N3,780,000 and the expense will accrue evenly throughout the year.
(iii) Capital grant of N14million is expected in February, May and November.
(iv) Salaries and wages for 2014 was N28million. In 2015, salaries and wages will increase by 12 1/2%
of the amount paid in 2014. Housing allowance is 33% of salaries and wages.
(v) Ground rent for industrial estates will be received as follows; January N2.8million; February N1.5million and
March N2.08million.
(vi) The training and development expenses of N700,000 to increase by 10% in year 2015. The total amount will
be spent on equal basis in February and October, 2015.
(vii) The Corporation will commence construction of 100 low-cost housing units in year 2015. The
following are the commitments through LPOs in 2014 which will be met in the New Year.

(vii) The Corporation will commence construction of 100 low-cost housing units in year 2015. The
following are the commitments through LPOs in 2014 which will be met in the New Year.

Date Purchased Particulars LPOs Time to pay Amount

(N‟Million)
15/8/2014 Cement 121 February 9.5
15/9/2014 Iron-rod 111 March 2.8
31/10/2014 Gravels 120 30/1/2015 1.5
1/11/2014 Plumbing 122 20/2/2015 0.75
Materials
5/12/2014 Sands 119 March 1.2513

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(viii) Rent receivable from the shopping complex of the Corporation are; January N1.7million, February
N1.5million and March N2.5million.
(ix) The cash balance as at December31, 2014 was N1.5million.
You are required to:
a. Prepare a cash flow projection for the first quarter of year 2015. (15 Marks)
b. Calculate the ratio of recurrent expenditure to total inflow for each month and make a brief comment on the
ratio. (5 Marks)
(Total 20 Marks)
QUESTION 4
AKEJU GOVERNMENT COLLEGE
Mr. John Udoh hails from Oron. He was born in 1954. He was employed by the National Teachers‟
Commission in 1995 and has served in various institutions. He has just attended a course at the
Administrative Staff College of Nigeria (ASCON), where he went through a financial accounting course for
non-accountants. Mallam Suhaib has been the Bursar of Akeju Government College for about ten years.
He was the one in charge of collecting revenue, issuing receipts, lodging money into the bank, keeping
tellers and collecting bank statements. He did the postings to the Cash Book and prepared the bank
reconciliation statements in arrears. Recently, it was observed, that Mr. Suhaib‟s life style had changed
from “low-profile” to one of ostentation. He had exhibited recklessness in his spending and caused
“tongues to start wagging”. Many people, including Mr. Udoh, were suspicious of Mr. Suhaib‟s sudden
source of wealth.
Consequently, the Head Teacher decided to beam search-light on Mr. Suhaib. Mr. Udoh commissioned a
firm of Chartered Accountants to look into the accounting books of the college. The examination revealed
the following:
(i) Cheques issued but not presented to the bank valued N150,000,000.00
(ii) Uncredited cheques amounted to N265,000,000.00
(iii) Bank charges amounted to N50,000,000.00.
(iv) Cash collections that were not yet banked amounted to N65,000,000.00
(v) There were direct transfers into the bank account of N33,000,000.00.
(vi) Cash book balance was N375,000,000.00
(vii) Subscriptions paid directly to bank valued N1,000,000.00.
(viii) The „Standing Order‟ in respect of standard pension payment of N10,000,000.00 had been effected
at the bank only. The bank statement revealed a balance of N178,000,000.00.
You are required to:
(a) State ONE basic problem faced by the operational system adopted by Malam Suhaib.
(b) List SIX issues or information that are contained in a bank statement. (6 Marks)
(c) Prepare Akeju Government College‟s bank reconciliation statement from the information above, and
comment on differences observed, if any.
(8 Marks) (Total 15 marks)

QUESTION 5
Fraud is described as an intentional act involving deception to obtain an unjust or illegal advantage. It
involves the presentation of a statement or representation made recklessly or without the belief in the
truth or suppression of facts. The Economic and Financial Crime Commission (EFCC) is a criminal
investigation organisation in charge of investigating financial crimes involving politicians, economic

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saboteurs and electoral fraudsters. EFCC’s “modus operandi” is such that any suspect or ‘accused’ must
deposit all his money and other belongings with the exhibit section headed by Mr. Oripipe a cashier, who
is expected to pay all cash receipts collected by him to the Banking officer. The banking officer issues a
revenue receipt to the Cashier. Mrs. Innocent who is the resident auditor in charge of the organisation
conducted a physical cash survey and discovered that the total amount on the duplicate receipt book with
the banking officer is N4,550,000 which does not agree with the actual cash
paid in. It was therefore suspected that the organisation has been defrauded. The following information
relate to the deposits collected from January to December 2013:
N
i. Cash from Honourable Talaka. 12,500
ii. Cash from a container with five suite cases each containing. 250,000
iii. Cash recovered from Anine; a criminal that raided Ifako bank 4,000,000
iv. Cash sales of impounded lace. 425,000
v. FIVE boxes containing consumable items earlier disposed of for the sum of N16,000 was mistakenly kept
in Mr. Oripipe’s drawer and was later discovered by the auditor.
vi. On thorough investigation, it was discovered that the banking officer was illegally removing the sum of
N500 from every N2,500 paid to him by the cashier.

Required:
a. Explain briefly FOUR types of financial fraud. (4 Marks)
b. Prepare the correct statement of deposits from detainees, as it should be in Mr. Oripipe’s records and
identify the shortfall due to his negligence. (10 Marks)
c. Calculate the amount of cash lost by the government as a result of the fraud based on the Auditor’s
findings. (3 Marks)
d. As the Chief Accountant, state THREE measures you would put in place to reduce or eliminate this type
of financial fraud? (3 Marks)
(Total 20 Marks)
QUESTION 6
Nigeria presents an illuminating example of a developing mixed economy. The economy is mono-cultural
and almost entirely dependent on the extraction and exportation of crude petroleum. Nigeria has
operated a multi-level system of government for over five decades. The fiscal structure involves the
allocation of expenditure responsibilities and taxing powers among the Federal, State and Local
Governments as embodied in the Nigeria 1999 Constitution. The public sector plays a significant role in
the management of the economy at all levels of development. The Nigerian experience in fiscal
federalism, however, reveals that revenue allocation has always been a subject of controversy and various
revenue Commissions have been set up to look into the allocation formula. Specifically, there have been
discordant voices from different parts of the country on what to give priority; derivation, population or
absorptive capacity. Unfortunately, revenue - diversification capacity is low at all levels of government and
statutory allocations from the Federation Account remain the most important source of revenue to the
lower levels of government. Adoption of deficit budgets is widespread and fiscal operations of
governments have resulted in overall deficits in the attempt to provide many social goods and services
simultaneously.
Required:
a. Assess the nature of the Nigerian economy as a mixed and mono-cultural economy. (4 Marks)

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b. Explain any THREE main roles the public sector can possibly play in this economy. (6 Marks)
c. Compare “Fiscal Federalism” and “Federation Account”. (4 Marks)
d. Appraise each of the principles of revenue allocation in the scenario on the basis of efficiency.
(6 Marks)
e. Identify and explain the causes and likely consequences of widespread deficit financing among the
various governments in the Federation. (10 Marks) (Total 30 Marks)

QUESTION 7
International Public Sector Accounting Standard (IPSAS 25) states that Employee Benefits are all forms of
consideration given by an entity in exchange for service rendered by employees. This standard applies to
all public sector entities other than Government Business Enterprises.
You are required to:
a. Identify THREE categories of employee benefits that are included in this standard. (6 Marks)
b. Explain the concept of Government Business Enterprises. (4 Marks)
c. Discuss the Defined Contribution Plans (2 Marks)
d. Identify FOUR differences between International Public Sector Accounting Standard 25 and
International Accounting Standard (IAS) 19 on Employee Benefits. (8 Marks)
(Total 20 Marks)

QUESTION 8
The Cabinet of the Federal Government of Nigeria, a developing country operating a unitary system of
government is considering rationalisation and re-engineering of the operations of two States that are
economically unviable. The Finance Minister is considering policy interventions in the following areas:
(i) Strengthening public expenditure management to ensure that all public expenditures are wholly,
necessarily, reasonably and exclusively incurred for the purposes for which they are meant.
(ii) Changing the basis under which Public Sector Financial Statements are prepared from Committed
Basis to Cash Basis.
(iii) Introduction of Fund Accounting System.
You are required to:
a. State FIVE basic controls exercised over Government expenditure (2½ Marks)
b. Briefly explain the concept of Cash Basis of Accounting and state FOUR advantages and FOUR
disadvantages inherent in such a system. (8½ Marks)
c. Discuss any SIX types of Funds stipulated in the Constitution of the Federal Republic of Nigeria, 1999 as
amended. (9 Marks) (Total 20 Marks)

QUESTION 9

You are given the following details in respect of Fantasy Island Local Government for the budget year
20x1.
Head 1001 Taxes Collectible
The Population of the local Government is 2,000,000, of this population 18% are taxable at the rate of
₦1,692 each, and 25% of the taxable population are expected to default.
Head 1002 Reimbursements
The local government expected a reimbursement of ₦9,000,000 from National

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Primary Education Board for expenses incurred in running primary schools
Head 1003 Tenement Rates
The Local Government has 2,000 companies, each pays ₦2,000 per annum. The residential houses are
75,000, each pays ₦1,080 per annum. In the previous financial year 30% of the companies and 27% of
the residential houses defaulted in payments in those years. This trend is expected to continue for the
next five years. Past experience also showed that 10% of rates collected from companies and
the residential houses will be lost to Staff negligence, dishonesty and poor performance.
The Local Government expects in the year the sum of ₦18,000,000 from the Federal Governments in lieu
of rates on structures owned by them and within the jurisdiction of the Local Government.
Head 1004 Works and Housing
The sum of ₦36,000 is expected to be generated per month by each of the five cemeteries in the Local
Government. Traffic control unit will generate ₦27,000 per month.
Head 1005 Federation Account
The Share of the Local Government from both the State and Federal Government will be ₦9,000,000 per
month.
Head 1006 Earnings and Sales
The Council operates a model international market having 1500 shops, each paying ₦900 per month.
This year the rate will be reviewed upwards by 100%
Each of the twenty mass transit buses of the Council renders ₦4,500 per day For twenty three days in a
month.
Head 3001 Motor Vehicle
Ten 25 seater buses purchased five years ago for sport festival is to be disposed off at ₦2 million each.
Head 3002 Buildings
The Local Government has some buildings in low density areas of the local Government. It has been
decided to sell some of these houses as follows:
10 Units of 2 Bedroom flats ₦2,000,000 each
5 Units of 3 Bedroom flats ₦3,000,000 each
20 Units of 4 Bedroom detached duplex ₦10,000.000 each.
Head 3003 Agricultural equipment
The Local Government has some tractors, harvesters, plough etc., which are rented out to the farmers
within its jurisdiction. However, due to old age of these equipment and high maintenance cost. It has
been decided to sell them to the farmers’ co-operative society as follows:
5 harvesters will be sold at ₦50,000,000; and10 tractors will be sold at ₦1,500.000 each.
Head 2001 The Personnel Cost
The details of the personnel cost for the year are:
Post GL No Salary

₦
Head of Personnel 15 1 63,000 x 9,180
Head of Departments 13 5 49,500 x 7,650
Finance Officers 10 6 23,130 x 7,020
Personnel Officers 09 15 17,406 x 5,040
Clerical Officers 05 40 8,640 x 3,546
Office assistants / Drivers 03 35 5,400 x 3,276

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 All salary steps above are step one of the respective levels. The Council adopts step three of the levels
for budget preparations. Allowances are:
Rent 60% of basic salary
Transport 35% of basic salary
Others 15% of basic salary
The Chairman earns total salary of ₦614,633/annum
Other Charges ₦
2002 Secretary’s department 180,000
2003 Works and Housing department 540,000
2004 Agric. and Rural Development 810,000
20x1 Environmental Services Department 3,870,000
4001 Housing Scheme Programme 126,000,000
4002 General Administration 27,000.000
4003 Road Construction and Drainages 144,968,400
4004 Office complex expansion and quarters 160,153,200
4005 Mass Transit Buses 126,000,000
4006 Other Sectors 104,400,000
You are required to prepare the 20x1 Budget for the Local Government. (Show workings.}

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