◄Unit 4 INTRODUCTION TO NONPROFIT ORGANIZATIONSUnit 6 INTRODUCTION TO COMPANY ACCOUNTS►

Unit 5 PUBLIC SECTOR ACCOUNTING

  • Unit 5 PUBLIC SECTOR ACCOUNTING

    Key unit competence: To be able to prepare accounts for public sector

    organizations

    Introductory activity

    MASENGESHO has previously worked as accountant for a limited liability
    company. In May 2022 he has changed the employer and became a chief
    accountant for Gatsibo District just during the period of closing fiscal year.
    One of his duties is to prepare financial statements for the district. Besides
    his not familiar of preparing them because he was in private sector.

    Required:     Enumerate five financial statements prepared in public

    organizations.

    5.1. Public Finance management (PFM) legal framework

    Learning Activity 5.1

    HABAKUBANA Elaste, a budget Manager, asked you to describe the PFM
    cycle which is different from accounting cycle described in senior four.

    Required: Convince him by describing the PFM cycle.

    5.1.1. Introduction to Public Sector Accounting

    According to International Public Sector Accounting Standards Board (IPSASB),
    the term” Public sector” refers to national governments, Regional (eg: State,
    provincial, territorial) governments, local (eg; City, town) governments
    and related government entities (eg; agencies, boards, commissions and

    enterprises).

    Public sector plays a fundamental role in the political and economic structure

    of a country.

    The Rwanda Public Sector consists of the Following:
    – Central Government, Ministries, Donor projects, Embassies
    – Local government eg. Kigali city council
    – Public enterprises or parastatals eg. RITCO, WASAC, National post
    office, BNR

    – Charitable organizations

    Government organizations differ from business organizations discussed in

    previous units in that:

    – Governments have no stockholders or other owners;
    – They render services with no expectation of earning profit, and
    – They have power to require taxpayers to support financial operations
    whether or not they receive benefits in proportion to tax paid.
    – Similarly, non-profit organizations exist to lender services to the people
    with no expectation of earning profit from those services, have no
    owners, and seek financial resources from persons who do not expect
    either repayment or economic benefits in proportion to the resources
    provided
    – Governments and non-profit organizations are governed mainly by
    their budgets not by the market place. Through the budgetary process,
    these organizations control or strongly influence both their revenues

    and expenditures.

    Public sector organisations provide a great number of diversified services to
    the community. These organisations are also regarded non-profit organisation.
    All public sector bodies have one feature in common. Their specific powers are

    derived from parliament and their responsibilities are ultimately to parliament.

    Examples of public sector activity may include delivering Social security;

    administering urban planning and organizing national defence.

    The organization of the public sector can take several forms, including:
    Direct administration funded through taxation; the delivering organization to
    meet commercial success criteria and production decisions are determined by

    the government.

    5.1.2. Public finance

    Public finance describes finance as related to sovereign states and sub-national
    entities (states/provinces, countries, municipalities, etc.) and related public

    entities (eg. schools, districts) or agencies.

    Public finance is concerned with:

    • Identification of required expenditure of a public sector entity

    • Sources(s) of that entity’s revenue

    • The budgeting process

    • Debt issuance (municipal bonds for public sector works projects)

    Public Finance deals with the finances of public. It thus deals with the finances
    of government. The finances of the government include the raising and
    disbursement of government funds. It is concerned with the operation of the

    public treasury.

    5.1.3. Role of Public sector in the economy

    In the developing countries also the growth of public sector has been

    phenomenal.

    a) Information control

    To ensure that the general public has adequate information to make informed
    choices, the government ensure that business make available all necessary
    information to the public. This includes proper labelling on all goods available

    for sale. In this way, the government protects public health and safety.

    b) Monopoly control

    To keep any one business or company from becoming too powerful and
    concerning the market place, the government has to create antitrust laws to
    control or break up any monopolies. This allows the consumer to have a variety

    of fair option the market to choose from.

    c) Regulation Control

    To ensure that the businesses are held accountable for their actions, the
    government has created strict regulations for each different type of business.
    Individual businesses must take ownership of any negative effects created while
    doing business. Any example of a business creating negative effects includes a

    factory creating pollution.

    d) To drive Economic Development

    Most countries desire to achieve a high rate of economic development. However,
    the resources required to achieve the desired growth far exceeds the resources
    of local private enterprise and spontaneous will proactively intervene through

    the concept of state entrepreneurship

    e) Industrialization

    Industrialization is the most important requisite for economic development.
    Industrialization in the developing countries necessitates the extension
    of the public sector. In the developing countries the state is the only force
    that possesses the necessary levers for influencing the economy, the means
    for mobilizing and properly utilizing financial, natural, labor and material
    resources, applying scientific and technological achievements and overcoming

    a number of difficulties and contradictions typical of developing countries.

    f) Promotion of Science and Technology & Research

    Scientific and Technological revolution has an important bearing on economic

    development.

    The public sector has become the instrument for the development of science
    and technology and also the vehicle for the application of scientific and

    technological achievements in industrial and agricultural production.

    g) Planning

    Economic planning also has provided a stimulus to public sector in many
    countries. Expansion of the public sector is essential to make planning more

    effective.

    h) Public Utilities

    There are certain types of services known as public utilities such electricity, city
    transportation, water supply, railways, etc., are the examples of public utilities.
    The provision of these services needs huge investment. They are also
    monopolistic in nature. It has been realized that these services can be provided
    efficiently, economically and continuously only when the public utilities will be

    owned and operated by the state

    i) Resource Allocation

    The nature and pattern of resource allocation has an important bearing on
    economic development. The main reason for the expansion of the public sector
    in India, for example, lies in the pattern of resource allocation fixed in the plans.
    The nature and volume of public investment substantially affects the tone and

    texture of economic activity.

    j) Prevent Exploitation

    Sometimes the monopolist private producers have a tendency to reduce their
    output and raise the prices, and thus exploit the consumers in the process.
    Public takeover through nationalization a method by which exploitation of

    consumers can be prevented

    5.1.4. PFM Legal Framework and Institution Arrangement

    a) The public Finance Management Cycle

    The government of Rwanda Public finance management(PFM) cycle entails
    determination of national priorities, developing MTEF and the Budget,
    preparation and approval of the finance law, resources mobilization,
    procurement and budget execution, accounting and financial reporting, audit

    and legislative oversight.

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    The PFM cycle described above generally covers a three years’ period.

    Therefore, at any one point in time, three years budgets are at different points

    in the cycle: for example, in October of any year, the budget of the previous

    year is being audited, the budget of the current year is being executed, and next

    year’s budget preparation has already started.

    b) PFM legal framework

    Laws and regulations: The Government has put in place laws and regulations

    to enforce an effective and functional PFM system.

    – The 2003 Rwanda Constitution (as revised in 2015) especially
    Articles, 162,163,164,165,167,166,167 dealing with the PFM function

    of GoR.

    – Organic Law No12/2013/OL on State Finances and Property of
    2013 which is the principal law on the financial management within

    the Government of Rwanda and is subsidiary to the constitution.

    Under Article 13 of Organic law on State Finance and Property; Minister has
    the responsibility to enforce this Organic law and any prescribed norms and
    standards including any prescribed standards of accounting practice and
    uniform classification systems, in central and local Government administrative

    entities.

    – Ministerial order no 001/16/10/TC of 26/01/2016 relating to
    Financial regulations, 2016 on the Organic on State Finances and
    Property – which elaborates more on the implementation of the

    Organic law on State Finances and Property of 2013.

    – Laws and regulations on public procurement – which prescribe the

    procurement procedures within the General Government

    – Law establishing sources of revenues and property of decentralized
    entities- which provides for the list of taxes, fees and other charges
    levied by decentralized entities and determining their thresholds.
    Law describes and regulates the sources of revenues for decentralized

    entities in Rwanda.

    – Laws on Taxes – which prescribe provisions, on which tax payers
    including government agencies must also, adhere to in fulfilling tax

    obligations. They include:

    i. Law on direct taxes on incomes as modified and complemented to date;
    ii. Law establishing the value added tax
    iii. Law on tax procedures as modified and complemented to date;
    iv. Ministerial Order and Commissioner General’s governing direct taxes on
    income; and

    v. Any other law or modifications to the above laws.

    Human resource management and payroll – the following legislations

    govern human resource management and payroll:

    • Law regulating labor in Rwanda;
    • Law on general statutes for Rwanda Public service;
    • Presidential Order governing modalities for the recruitment of public
    servants;
    • Presidential Order determining the amount of salaries and other
    fringe benefits to state high political leaders and modalities of their
    allocation;
    • National employment policy;
    • Guidelines for fixing salaries in the Rwandan Public Sector;

    • Any other law or modifications to the above laws.

    – Asset management – underpinned by the following laws, regulation,
    policies and procedures:
    • Ministerial order determining the organization and functioning of the
    asset disposal evaluation committee to set value for state private assets
    to be sold, exchanged, donated or completely destroyed;
    • The fleet policy of government of Rwanda;
    • Law on disposal of state assets which determines the procedure
    governing the disposal of State private assets; and
    • The law governing privatization of public institutions and national
    investment.
    • Any other law or modifications to the above laws.

    C) PFM Institutional arrangements

    In accordance with Article 61 and 65 of the 2003 Constitution of Rwanda as

    revised in 2015, the PFM institutional framework of the GoR comprises of:

    i. Legislature/Parliament – The Constitution establishes a bi-cameral
    parliament comprising the Chamber of Deputies (Deputies) and the Senate
    (Senators) to carry out legislative and oversight function by debating and

    passing laws. It also legislates and exercises control over the Executive.

    ii. The executive – Article 97 of The Constitution vests all executive power
    on the President of the Cabinet. The cabinet is accountable to both the
    president and parliament in accordance with the Constitution. The

    Cabinet through the Minister retains the overall financial accountability.

    iii. The judiciary – The Constitution establishes the judiciary and provides
    that the judicial authority is vested in the judiciary composed or ordinary
    Courts and Specialized Courts. Courts consist of ordinary and specialized
    Courts. Ordinary Courts are comprised of the Supreme Court, the High
    Court, Intermediate Courts and Primary Courts. Specialized Courts are

    comprised of Commercial Courts and Military Courts.

    iv. The Office of Ombudsman – the Ombudsman as an independent public
    institution to carry out the following responsibilities:
    • To act as a link between the citizen and public and private institutions;
    to prevent and fight against injustice, corruption and other related

    offences in public and private administration;

    • To receive and examine complaints from individuals and independent
    associations against the acts of public officials or organs in order to

    find solutions to such complaints if they are well founded;

    • To receive declaration of assets of the president of the Republic, the
    president of the Senate, the Speaker of the Chamber of Deputies, the

    President of the Supreme Court, The Prime Minister; other members of

    the Cabinet and other public officers entrusted with the management

    of state finances and property.

    v. Office of the Auditor General – Under Article 65 of The constitution
    provides for the Office of Auditor general and to complete the accountability
    cycle, the Article 66 of The Constitution requires the Auditor General to

    submit an annual audited financial report to Parliament.

    The audit report indicates the manner in which the budget was utilized,
    unnecessary expenses which were incurred or expenses which were contrary
    to the law and whether there was misappropriation or general misuse of public
    funds.
    Parliament reviews, debates and provides oversight function on the executive.
    The Auditor general submits a copy of the report to the President of the republic,
    Cabinet, the President of the Supreme Court and The Prosecutor General of the
    Republic.
    The Parliament, after receiving the report of the Auditor General referred to
    in this article, examines the report and takes appropriate decisions within six

    months.

    5.1.5. Accounting Policies

    In general, there are two alternative bases of accounting:

    i. Cash basis of accounting

    ii. Accrual basis of accounting.

    The cash basis of accounting is an accounting methodology under which
    transactions and events are recognized in the books of accounts only when
    cash and cash equivalents is received or paid by the entity. Therefore, the
    transactions and events are recorded in the books of accounts in the period in

    which the associated cash flows occur.

    Cash is defined as the cash on hand, cash at bank and demand on deposits.
    Whereas, cash equivalents is defined as short term, highly liquid investments
    (with maturity is less than three months from the date of purchase) that are
    readily convertible to known amounts of cash and which are not subject to a

    significant risk of change in value.

    The accrual basis of accounting is an accounting methodology under which
    transactions and other events are recognized in the books of accounts when
    they occur (and not only when cash or cash equivalent is received or paid).
    Therefore, the transaction and events are recorded in the books of accounts

    and recognized in the financial statements of the period to which they relate.

    The following table shows a summary of differences between the two accounting

    bases:

    f

    a

    In between the basis of accounting described above, are the following modified

    bases of accounting:

    • Modified cash basis of accounting; and

    • Modified Accrual basis of accounting

    Under the Modified cash basis, the main basis of accounting is cash i.e. for all
    intents and purposes economic transactions of a reporting entity are measured,
    recorded, and reported on the basis of cash, with a few exceptions to the general
    rule, where certain economic events are identified, measured, recorded and

    reported on, not strictly on receipt or payment, but are “accrued”.

    Conversely where the main basis of recognizing, measuring, recording and
    reporting on economic events and transactions is the “accrual basis” but the
    reporting entity has allowed a few exceptions to the general rule, for example
    certain of its expenses and or income are only recognized on cash payment
    (cash outflow) or receipt (cash inflow), then the basis of accounting is referred

    to as “modified accrual basis”.

    Except for the subsidiary entities affiliated to the centralized entities, public
    entities were used to maintain their books of accounts on a modified accrual

    basis of accounting.

    The subsidiary entities affiliated to the decentralized entities were used to
    maintain their books of accounts on a modified cash basis of accounting and
    progressively move to the same accounting basis as that of the rest of the
    public entities but now the Government of Rwanda is moving to accrual basis

    in maintaining its books of account.

    Application activity 5.1

    1. There are several arguments that justify government intervention
    in economies. The following are included in these reasons with

    exception of:

    A. Market Failure

    B. Redistribution

    C. Political ideology

    D. Monetary Policy

    2. Choose the most accurate statement among the following in

    relation to Public Finance Management (PFM) cycle:

    A. In Rwanda, the government’s national budget runs from 30 June to

    1 July

    B. In Rwanda, budgets should be approved by the legislature, which

    should be able to effectively scrutinize government plans

    C. In Rwanda, annual financial reports should be subject to dependent

    external audit and scrutiny

    D. There should be no predictability but control in the budget execution
    In public finance management, the three fundamental aspects to

    treasury management include:

    i. The financing of operations in a way that minimizes funding costs and

    matches cash flow needs

    ii. The management of working capital

    iii. The management of financial risks to which cash flows are exposed

    A. (i) Only

    B. (i), (ii)&(iii)

    C. (i)&(iii) only

    D. None of the above

    5.2. Record Government Revenues and Expenditures

    Learning Activity 5.2

    You are hired as a public accountant, what are the minimum books of

    accounts will you keep?

    5.2.1. Books of accounts

    The finance department shall maintain the necessary books of accounts to
    ensure that financial information is comprehensive. In keeping books of
    accounts, double entry concept will be applied. This entails that a financial
    transaction gives rise to two equal and opposite entries one debit and the other
    credit.
    An account is a record in ledger form summarizing all the transactions that have
    taken place to a particular event or activity that ledger record relates. These
    can be classified as Personal and Impersonal Accounts. Personal accounts are
    those that relate to debtors and creditors (customers and suppliers) while
    Impersonal Accounts can be divided between Real account and Nominal
    accounts. Real accounts are those in which possessions are recorded such as
    buildings, machinery, fixtures and fittings, stocks while nominal accounts are

    those in which expenses, income and capital are recorded.

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    Public entities should at a minimum maintain the following books of accounts

    in electronic or manual form:

    1. Cash book

    2. Petty cash book

    3. General ledger

    4. Accounts payable ledger

    5. Accounts receivable ledger

    6. The journal

    Note: Description of the books above have been seen in Senior 4 units 3 and 4

    5.2.2. Government standard chart of accounts

    1. Overview of the Standard Chart of Accounts

    The Standard Chart of Accounts (SCoA) is a classification system by which
    financial transactions are recorded. Article 97 of the Ministerial Order No.
    001/16/10TC of 26/01/2016 relating to financial regulations requires the
    Minister and upon the advice of the Accountant General to issue a standardised
    Chart of Accounts generally applicable to all public entities excluding public
    institutions. Under the regulations, public institutions are empowered to
    develop their own chart of accounts adapted to their financial operations. The
    SCoA provides a basis for a uniform budget classification and execution. It is
    mandatory for all Government entities within general Government to use the
    coding structure of SCoA to budget and execute the budget. For entities using
    IFMIS, the SCoA is already set up in the system, however, for entities using stand

    alone systems the SCoA has to be set independently.

    Consistent with Article 97 of the Ministerial Order No 001/16/10/TC of
    26/01/2016

    Relating to financial regulations, the coding structure of the SCoA comprises
    five segments. When recording a transaction, a selection must be made from
    each of the five segments, meaning that all segments must be used for recording

    a single transaction by answering the questions provided in the diagram below:

    s

    1. The structure of the SCoA

    The diagram below illustrates the structure of the SCoA of the Government and
    shows the interaction between the segments and classifications within each

    segment

    d

    The following is a description of each of the five segments of the SCoA:
    a) Administrative Segment
    This is based on administrative responsibility, which Executive (Ministry/

    District) has overall responsibility and accountability for the inflows and
    outflows of financial and other resources, and also provides for the lower

    delegated levels of responsibility and accountability.

    The administrative segment provides for four levels as follows:
    • Level 1 – Ministry/District: represents the highest level of administrative
    responsibility
    • Level 2 – Public entity: represents the public level where budget
    appropriations are made.
    • Level 3 – Sub public entity: at the disposal of the public entities which
    may wish to drive accountability to lower levels of their structures.
    • Level 4- revenue/cost centre: at the disposal of the public entities which

    may wish to drive accountability to lower levels of their structure

    b) Fund Segment

    This segment defines the source and type of funding. The segment helps track
    revenues and expenditures per source and type of funding. The segment applies
    to both revenues (inflows) and expenditures (outflows). “Source of funding”

    defines the source of funding for inflows.

    In broad term, there are two broad sources of revenues – Domestic and External
    sources. Domestic sources may be from Government of other local institutions

    and individuals.

    c) Program/Function/EDPRS Segment

    This segment defines the purpose of the transactions through programmatic
    classification. The Government programmes and sub-programmes reflect

    Government policy, goals and objectives.

    d) Economic Segment

    This segment defines the natural accounting nature of the transaction, visà-
    vis, revenue, expense, asset, liability and capital (consolidated fund).
    The classification includes the five (5) classes accordingly. The economic
    classification is closely aligned to the GFS system in terms of operating revenues

    and expenses.

    The categorisation for economic item under the chart of accounts is classified

    as follows: Class – Chapter – Sub-chapter – Item – Sub-item.

    The following illustrates coding under the economic segments of the SCoA:

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    e) Location Segment

    The geographical segment defines where the authority for budget execution
    (e.g. expenditure) lies. However, some expenditure made centrally for example
    in a Ministry Headquarters will actually be benefiting the people in a district,
    e.g. the building of a district hospital or school.
    This segment comprises 5 digits and provides for classifying the beneficiary
    of the spending by Province, District (Akarere) and Sector (Umurenge).

    The following illustrates coding under the location segments of the SCoA:

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    3. Updating the Government SCoA

    The accountant General may on his or her own or, on the proposal of a Chief
    Budget Manager modify the Chart of accounts. The final authority for updating

    the chart of accounts rests with the Accountant General.

    The following procedures will be followed in updating the chart of accounts:
    a) Where a Chief Budget Manager has identified the need for new accounts
    codes, he or she apply to the Accountant General for the new codes.
    b) The Accountant General shall review the request submitted and
    determine whether it is justified after making any consultations that he
    or she may consider necessary. Where the request is not justified and
    the existing Chart of accounts can be used to track the transactions, the
    Accountant General shall advise the Chief Budget Manager on which

    codes to use and how to report on their transactions.

    The Accountant General shall publish the updated CoA whenever an updates is

    made

    5.2.3. Purpose of Government Accounting

    The purposes of government accounting include:
    • Demonstrating the proprietary of transactions and their conformity
    with the law, established rules and regulations
    • Measuring current performance
    • Providing useful information for the efficient control and effective
    management of government operations
    • Facilitating audit exercise to be carried out
    • Planning future operations

    • Appraising those in the authority, in efficiency and effectiveness

    Users of Government Accounting Information

    There are two groups of users of Government Accounting information: internal

    and External.

    Internal Users and Interest Areas

    This group of users includes:
    • The Labour union in the public service which will press for improved
    conditions of employment and security of tenure for their members.
    • The Members of the Executive Arm of Government: such as the
    President, Ministers, Governors, and Mayors. Their interest areas
    are to ensure probity and accountability through score keeping
    and performance control which are achieved through accounting

    information.

    • The Top Management members: Permanent Secretaries of various
    Ministries for example. They are the conduit of accounting information
    generation and transmission and serve as liaison officers between

    Government, employees and the public.

    External Users and Areas of Interest

    External Users include

    • Members of the Legislature at both National, State and Local
    Government levels. Information in the accounts of Government is the
    major media through which politicians render stewardship to their
    constituencies and appraise them of the endeavours of governance.
    • The Members of the Public, to demonstrate accountability and assist

    the people to appreciate or otherwise the efforts of Governments

    • Researchers and Financial Journalists: Researchers are expected
    to develop new and better ideas of governance. Financial journalists
    cherish accounting information to advise existing and potential

    investors.

    • Financial Institutions, such as Commercial Banks, World Bank,
    International Monetary Fund. Accounting information assists them to

    evaluate the credit rating of a borrowing Nation.

    • Governments, apart from the ones reporting: Governments
    collaborate on ideas of investment and research. They require

    accounting information on the well-being or otherwise of each other.

    • Suppliers and Contractors: Suppliers and contractors are eager to
    ascertain the ability of a Government to pay for goods and services

    delivered. Only Accounting information can be revealing.

    5.2.4. Source of Government Finance

    The Government revenue means the amounts which are received by the
    Government during a particular year. In other words, the income of the
    Government is known as public or government revenue. The sources may be

    classified as:

    1. Internal sources

    2. External sources

    These sources are explained as under:

    I. Internal sources

    Internal sources consist of those amounts which are received by the Government
    internally or from the individuals of the country. The main internal sources of

    revenue of Rwanda Government are:

    • Direct taxation

    This taxation includes income tax, corporation tax and capital gains tax. About
    70% of Rwanda Government’s revenue comes from direct taxation.
    • Indirect taxation

    Indirect taxation includes:

    1. Tax on domestic manufacturers

    2. Customs duty on import and exports

    3. Excise duties: It is duty imposed mostly on production activities for
    sales purposes, largely collected at manufacturing stage, showing

    downward trend

    4. VAT

    Indirect taxation is the major source of Government revenue from internal
    sources. This taxation contributes about 50% of Government revenue in

    Rwanda.

    • License fees

    The Government of Rwanda receives fees from business and trading licenses,
    license fees under traffic act and other miscellaneous licenses. This source

    contributes about 5% of Government revenue in Rwanda.

    • Fines and penalties

    Fines and penalties is another source of revenue. These fines and penalties
    are imposed on the individuals for not obeying the laws, rules and regulations
    of the country. This source contributes about 5% of total income of Rwanda

    Government from internal sources.

    • Sale of goods, services and properties

    The Government also receives income from the sale of different goods and
    services properties. About 3% to 4% of income of Government of Rwanda

    comes from this source

    • Rent

    Closed school buildings, empty state-owned buildings, and park shelter and
    reception facilities are examples of facilities that can be rented out. Government
    agencies also earn rent proceeds for the use of property by other agencies. For
    example, if the federal government needs space in a small town, the feds might
    arrange to rent out an unused office in the town hall from the municipality.

    Unusable properties are sold off.

    • Investments

    Government sometimes uses revenues as a means of earning interest and
    dividends. While the investment might be made up of tax francs, the interest,
    dividends and capital gains are considered non-tax revenue. The investment
    opportunities might be in the form of mutual funds, bonds, foreign exchange
    rates and government-backed loans to businesses and individuals, such as

    small business loans and mortgages.

    • Grants and Gifts

    Gifts are Voluntary contributions by individuals or institutions to the
    government. Gifts are significant source of revenue during war and emergency.
    A grant from one government to another is an important source of revenue in

    the modern days.

    The government at the Centre provides grants to State governments and the
    State governments provide grants to the local government to carry out their
    functions. Grants from foreign countries are known as Foreign Aid. Developing
    countries receive military aid, food aid, technological aid, etc from developed

    countries.

    • Borrowings

    The government may force various individuals, firms and institutions to lend

    to it at a much lower rate than the market would have offered.

    • Other sources

    In addition to the above sources, the Government receives income from some
    other miscellaneous sources. These sources contribute a small amount of

    Government revenue.

    II. External sources

    External sources of Government revenue consist of external loans and grants.
    These loans and grants are obtained by the Government for development
    purposes. These loans and grants are the main sources of income of capital

    budgets.

    These loans and grants are obtained from different countries and international
    organizations. The Rwanda government obtains loans and grants mainly from
    the U.S.A, Germany, Japan, Netherlands, Denmark, U.K and so on.

    The main international organizations which provide loans to Rwanda are World
    Bank, African Development Bank, International Monetary fund, Arab League,

    European Economic Community, International Development Agencies, etc

    Government expenditure

    Government expenditure means those amounts which are spent by the
    Government for different purposes. The Government expenditure may be

    classified as:

    a) Recurrent expenditure

    b) Development expenditure

    These are explained as under:

    Recurrent expenditure

    Recurrent expenditure means revenue expenditure. This expenditure is
    incurred by the Government on normal activities. The amounts which are
    spent by the Government on regular activities like defense, health, education,
    administration, etc, are referred to as recurrent expenditure the main

    expenditure heads of recurrent expenditure are:

    General public administration

    This expenditure is incurred on general administration of the country. About

    10% to 15% of total expenditure in Rwanda is incurred for this purpose.

    Defense

    Defense of the country is of great importance for its stability. The government
    of Rwanda spends about …. % of recurrent expenditure on the defense. This

    percentage is very low as compared to other countries.

    Education

    Education is the main priority of Rwanda Government. About 20% to 25% of

    recurrent expenditure is incurred on education.

    Health

    The government spends on health facilities. About 6% of recurrent expenditure

    is incurred for providing health services.

    Social welfare

    The government of Rwanda spends on social services like housing, sports; etc

    the share of this head in total recurrent expenditure is about 2%.

    Economic services

    The government of Rwanda spends huge amounts on providing economic
    services. These include agriculture, forestry, fishing, electricity, gas, water,
    transport and communication, etc. About 16% of total recurrent expenditure is

    incurred for this purpose.

    Other services

    There are some miscellaneous items of recurrent expenditure. About 30% of

    total expenditure is incurred for this purpose.

    Development expenditure

    Development expenditure is incurred for the establishment of new agricultural
    and industrial projects, installation of new plant and machinery, construction

    of new roads and buildings, purchase of new equipments etc.

    Development expenditure is mainly financed from external loans and grants.
    Internal borrowing is also another source of financing the development

    expenditure. Development expenditure is shown in capital budget.

    5.2.5. Role of IFMIS in Effective PFM

    The Government has put in place an Integrated Financial Management
    Information System (IFMIS) as the principal system of Government for
    financial management. It is intended that the system will cover all the General
    Government entities with the implementation being carried out in a phased

    manner. Accordingly, the IFMIS shall be used for the following purposes:

    • Centerpiece of the government financial management processes of
    planning, budget preparation, budget execution, revenue management,
    inventory management, assets management, accounting and financial
    reporting.
    • Preparing financial management reports: these enable improved
    management decisions making through provision of real time financial
    statements.
    • Harmonizing processing of transactions: transaction processing across
    Government is made uniform through use of SCoA therefore offering a
    common integrated enterprise platform for consistency in process and
    procedures;
    • On-line inquiries: users can access the system from any location with
    the required authorization details;
    • Controls for commitments, expenditure and budgetary adjustments
    are made possible; and
    • Special accounting needs such as development projects and special
    funds are also provided.


    The figure below summaries the typical structure of the IFMIS

    s

    5.2.6. Recording Government Revenue and Expenditure

    Although the recording of government revenue and expenditure is based on
    the concept of double entry but the procedure of recording transactions in the
    government sector is different from a commercial enterprise. In the government

    sector, the theory of fund accounting is followed.

    A fund is an independent fiscal and accounting entity with resources and
    obligations. Each government unit can be regarded as a fund and complete
    accounting records maintained for each fund. There are various government
    ministries and in each ministry there are various departments. For example,

    the ministry of commerce has the following departments:

    General administration and planning
    • Department of internal trade
    • External trade services

    • Inspectorate of weights and measures

    Each department of the ministry of commerce can be regarded as a separate

    fund.

    Major steps in the government accounting in Rwanda are the following:

    Annual estimates

    These estimates are prepared by the various ministries and these submitted to
    the treasury. These estimates include revenue and expenditure figures for the

    next year.

    Presentation of the budget

    The Minister of finance presents the budget for the next financial year before
    the parliament in the month of June every year. The financial year of the

    government starts from 1st July and ends on 30th June next year.

    The budget contains the estimate of government revenue and government
    expenditure for the next year. The various proposals of the budget are
    debated in the parliament. After the approval of the parliament the budget is

    implemented.

    Spending by Ministries

    Some specific amounts are appropriated by the Parliament to different
    ministries. The government ministries can spend the amounts appropriated
    to them. Appropriated amounts can be used by the ministries to perform their

    duties, there are different vote numbers assigned to different ministries.

    These votes may be further divided into recurrent (R) and development (D)
    votes. These vote numbers are used for reference purposes. For example, vote
    R- 11 and D11 are recurrent and development vote numbers for the ministry
    of health. In each Ministry, there are sub votes for different departments of any

    ministry.

    The Fund System of Governmental Accounting

    Public funds are monies owned by the Nation and controlled and applied by
    the central government for public works and services. In Rwanda, all resources
    (revenue from tax, non-fiscal revenues) are recorded into a fund known as
    a consolidated fund. The consolidated fund account is kept by the treasury
    under the ministry of finance, and all revenues and grants received by the
    Government are paid into this account. No money can be withdrawn from this
    account without approval of Parliament, i.e. Parliament is the sole signatory to

    this account.

    The fund accounting system is a concept which is used to describe how
    government resources are accounted for from one major fund source. The word
    fund is therefore used to describe the whole government set up as one big fund

    in terms of structure.

    Governmental fund

    Government funds are used to finance general government activities such as
    police and fire protection, courts, inspection, and general administration. Most
    of their financial resources are subsequently budgeted (Appropriated) for

    specific “general government” uses (expenditures) by the legislative body.

    Government funds include:

    – The general Fund

    – Special Revenue Fund

    – Capital Project Funds

    – Debt Service Funds

    The accounting equation of most governmental funds is:

    Current Assets – Current Liabilities = Fund Balance

    Thus, Governmental funds are essentially “Working capital” funds and their
    operations are measured terms of sources and uses of working capital, that it

    is, changes in working capital.

    When Fund Balance is positive, there is a greater likelihood that the government
    will pay it is liabilities. When Fund Balance is negative, short term creditors

    may not be paid, and public organization may be forced into bankruptcy.

    A. The General Fund

    The primary governmental is used to account for most routine operations of the
    governmental entity. All general governmental resources that are not required
    to be accounted for in another fund are accounted for in the General Fund.
    – General fund revenue consists primarily of taxes (Property, sales,
    income, and excise), licenses, fines, and interest.
    – General fund revenue expenditures are budgeted and appropriated for

    by council or other legislative body.

    Typical journal entries include:

    a) To record the budget :

    Estimations revenues                                XX

    Appropriations                                                   XX

    Fund Balance for the last year            XX

    Note: The budgetary entry causes the Fund Balance account to be carried
    during the year at it is planned end of year balance.

    b) To record revenues

    Cash or receivable                         XX

    Allowance for collectives’ receivables                  XX

    Revenues            XX

    c) To record collection of receivables and write off of uncollectible

    Cash or receivable                 XX

    Receivable                           XX

    Allowance for uncollectible receivables                         XX

    Receivable                    XX

    d) To record purchase order issued or contract commitment

    Encumbrances (Expected expenditures)                 XX

    Reserve for encumbrances                                                                 XX

    e) To record Expenditures upon receipt of invoice

    Reserve for encumbrances                       XX

    Encumbrances (Expected expenditures)                           XX

    Expenditures (Actual cost)                XX

    Vouchers Payable                                                      XX

    Note: While goods and services committed for by purchase order or other
    contract are encumbered in governmental funds to avoid overspending
    appropriations, many expenditures are controlled by other means and need
    not to be encumbered. For example, wages are set by contract and controlled

    by established payroll procedures and are not encumbered.

    f) To record supplies

    Supplies inventory                       XX

    Fund Balance reserve for supplies inventory                                            XX

    The supplies inventory indicates that portion of fund balance is not available

    Note: This customary entry compounds these two more proper entries.

    6a. Supplies inventory                                          XX

    Fund Balance                                                             XX

    6b. Fund Balance                                                      XX

    Fund balance reserve for supplies inventory                              XX

    The entry (ies) would be reversed had supplies inventory decreased. The
    increase (decrease) in supplies inventory is reported as an “other Financing
    Source (Use)” in the governmental fund “Operating Statement”, the statement
    of Revenues, Expenditures, and Change in Fund Balance.

    g) To record closing entries at year end

    Revenues                                                                                     XX

    Appropriations (budgeted)                                                   XX

    Collection of prior year error                                                XX

    Fund balance (difference – Debit or credit)                    XX

    Estimated revenues                                                                  XX

    Expenditures                                                                                 XX

    Encumbrances                                                                              XX

    Cumulative effect of change in accounting                      XX

    Appropriations is the authorizations of asset outflows of uses estimated of

    fund working capital

    h) To record encumbrance reversing entry – beginning of next year

    Encumbrances                                                                                                     XX

    Fund balances (reserves)                                                                                 XX

    The encumbrance system is used in most governmental fund to prevent over
    expenditure and to demonstrate compliance with legal requirements. When it

    comes to close the end of fiscal year the encumbrance account is credited.

    B. Special Revenue Funds

    They are used to account that are externally restricted or designated by the
    legislative body for specific general government purposes. For example, motor
    fuel taxes used to finance the provincial road construction would be accounted

    for in a Special Revenue Fund.

    C. Capital Project Funds

    The capital project funds used to account for acquisition and use for financial
    resources to construct or otherwise acquire long-lived general government real
    property and equipment. For example, to construct a new city hall, conference

    center, stadium, Airport.

    D. Debt Service Funds

    The Debt Service Funds used to account for repayment of all general government
    long term debit recorded in the General Long Term Debt Account Group and
    payment of related interest and fiscal agent charges. Debit Service Fund
    budgetary may be used to record the estimated revenues (e.g., from taxes),
    estimated other financing sources (e.g. from inter fund transfer from General

    Fund) and estimated income (e.g., from investment)

    Example:

    1. To record tax revenues and other financing sources

    Cash or receivables                          XX

    Allowances for uncollectible taxes                          XX

    Tax revenues                                                                      XX

    Operating transfer from General Fund                    XX

    2. To record investment made

    Investment                 XX

    Cash                                                  XX

    3. To record investment income

    Cash                                                XX

    Investment revenues                                  XX

    4. To record expenditures for debt principal retirement (at maturity date)
    and interest (at due date)
    Expenditures                                            XX

    Bonds payables (At maturity date)                                             XX

    Interest payable                        XX

    5. To record payment of matured debt and interest due

    Bond payables                                       XX

    Interest payable (At maturity date)                        XX

    Cash                                                                                     XX

    E. Account groups

    Account groups are memorandum list and offset accounts that provide a record
    of general government fixed assets and long term debt, which are not recorded

    in the governmental funds.

    Account groups include:

    The general Fixed Assets Account Group (GFAAG)

    The account group accounting equations are:

    GFAAG: General Fixed Assets = Investment in General Fixed Assets

    GLTDAG: Amount Available in Debt Service Fund for GLTD Retirement

    + Amount to be provided in Future Years for GLTD Retirement

    -------------------------------------------------------------------------

    =       General Long Term Debt Payable


    Example for some records:

    1. To record general fixed assets (e.g., Police cars fire trucks) acquired the

    General Fund or Special Revenue Funds:

    Machinery and equipment (Police cars or fire trucks)           XX

    Investment in General Fixed Assets                                        XX

    2. To record general long term debt incurred

    Amount to be provided for payment of bonds                           XX

    Amount to be provided for payment of long-term notes                        XX

    Amount to be provided for payment of capital lease principal                XX

    Bonds payable                                                                                                                XX

    Long term notes payable                                                                                           XX

    Capital lease (Principal) payable                                                                            XX

    Proprietary Funds

    Proprietary funds are used to finance a government’s self-supporting “business

    type” activities (e.g., utilities).

    Proprietary funds include:

    – Enterprise Funds (Electricity, Gas, water)

    – Internal Service Funds (supplies, photocopies)

    The accounting equation of proprietary funds:

    curr. Assets + Fixed Assets +Other Assets

                               −Curr.Liab.+ Long term Debt +Contrib.Capital

                              +Retained Earnings

    The accounting equation of proprietary funds is identical to that of a business
    corporation, it includes accounts for all related assets and liabilities, not just
    for current assets and current liabilities as well as for contributed capital and

    retained earnings.

    Proprietary fund operations are measured in terms of revenues earned,
    expenses incurred, and net income or loss.

    Sample entries:

    1. To record operating revenues :

    Cash                                                    XX

    Revenue from sale                                                             XX

    Revenue from appliances                                               XX

    Revenues from Other                                                        XX

    2. To record governmental grants for operating and capital purposes

    Cash or receivables                           XX

    Cash construction                                             XX

    Revenues – State grants                            XX

    Contributed capital (Capital Grant)     XX

    3. To record operating expenses

    Expenses - cost electricity purchased                XX

    Expenses – depreciation                                          XX

    Expenses – Salaries and wages                             XX

    Expenses – other                                                         XX

    Accumulated depreciation                                               XX

    Cash                                                                                            XX

    Payable                                                                                      XX

    4. To close the account at year-end

    Revenues from sales                               XX

    Revenues from sale of appliances    XX

    Revenues – State Grants       XX

    Revenues from Other             XX

    Expenses –cost purchased  XX

    Expenses –depreciation       XX

    Expenses Salaries and Wages             XX

    Expenses – Interest                                  XX

    Expenses – Other                                      XX

    Retained earnings (Dr or Cr)                XX

    – The General Long-Term Debt Account Group (GLTDAG)

    Fiduciary Funds

    Fiduciary Funds are used account for government’s fiduciary or stewardship
    responsibilities as an agent (Agency Funds) or trustee (Trust Funds) for other

    governments, funds, organizations, and or individuals.

    Fiducially funds include:

    – Nonexpendable Trust Funds (e.g., Donations)
    – Expendable Trust Funds (e.g., library books)
    – Pension Trust Funds (Pension, retirement)

    – Agency Funds (e.g, City, Schools district…)

    Expendable Trust Funds are accounted for like governmental funds, and
    both nonexpendable Trust Funds and Pension Trust Fund are accounted for
    like proprietary funds. Agency Funds are purely custodial (Current Assets =

    Current Liabilities).

    For agency Funds, the government has no equity. Further, Agency Funds do not
    have operating accounts and no operating statement is prepared for Agency

    Funds.

    F. Some Special Funds

    In relation to fund accounting in the public sector, there are some special funds

    which are established. These are explained as under:

    a) Trust funds

    Trust funds are those funds whereby the government receives money in
    the capacity of a trustee e.g. Survivors fund, widows and children’s pension
    fund. In this fund, all married civil servants contribute a certain amount of
    their monthly salaries and they get the refund on the retirement. Some other
    examples of trust funds are former known as National Social Security Fund

    (N.S.S.F) and RAMA. (Currently known as RSSB: Rwanda Social Security Board)

    A trust fund is an independent accounting entity. It may own some property
    and other assets like investments etc. Withdrawals from a trust fund are made
    in accordance with some statutory provisions. A trust fund is also known as a

    fiduciary fund.

    b) Sinking funds

    These funds are created with the purpose of the repayment of public debts.
    Mostly, these funds are set up by the approval of the Parliament. Some annual
    appropriations are made in these funds. The amounts appropriated are
    invested to earn some interest. When any public debt matures then the sinking

    fund is used to redeem this debt.

    c) Revolving funds

    These funds are also set up by the approval of the parliament. These funds
    provide the financial resources for achieving some specified objectives.

    Some Government enterprises are set up through revolving funds. The initial

    appropriation in these funds is made out of the consolidated fund. The receipts
    generated in such funds are automatically used by the respective enterprises in

    accordance with the provisions of the Act that set up the fund.

    d) Capital project funds

    The purpose of capital project is to provide resources for the completion of
    some specific capital project. Main sources of financing include the proceeds of
    bond issues, grants and transfers from other funds. A separate capital project

    fund is created for each major project.

    Conclusion

    Most governmental fund accounting systems use both budgetary accounts and

    regular accounts

    – Budgetary accounts are nominal accounts used to record approved
        budgetary estimates of revenues and expenditures (appropriations)
    – Regular accounts are used to record the actual revenues, expenditures

        and other transactions affecting the funds

    The followings accounts are usually employed in governmental funds:

    – Estimated revenues: Estimated sources of fund working capital.
        The estimated account is debited to record the revenue budget and i
         closed at the end of the period.
    – Appropriations: Estimated uses of fund working capital (except for
       other financing uses). The appropriation account is credited to record

       the budgeted expenditures and is closed at the end of the period.

    – Revenues

    – Other financing sources: Non revenues sources

    – Expenditures

    – Fund balance and Reserve

    Application activity 5.2

    A police department orders some stationary on 11 December 2012. On
    15 December 2012, the police department received an invoice requesting
    payment for the stationary that had been ordered. Payment was requested
    to be made by 11 January 2013 but the police department actually paid for
    the stationary by same-day bank transfer on 3 January 2013. The stationary
    order was delivered to the police department and signed as received on 28

    December 2013.

    The police department’s financial year runs from 1 January to 31 December.

    Compare how the police department would report the stationary order

    under:

    a) Cash basis
    b) Modified cash basis, with one month specified period

    c) Accruals basis

    5.3. Preparation of financial statements for public

    institutions

    Learning Activity 5.3

    Your District Accountant is hiring you to help him in closing the financial

    period due to the numerous activities to be done during a given period.

    Required: Discuss any five financial statements that you will need to

    prepare for your District.

    General guidance relating to preparation of financial statements

    Financial statements must present fairly the financial position, financial
    performance and cash flows of an entity to ensure that the users of financial
    statements are provided with useful information for decision making
    purposes. The general qualitative characteristics of financial reporting are:
    • Understandability  –  the information must be readily
    understandable to users of financial statements. This means that
    information must be clearly presented, with additional information

    supplied in the supporting notes as needed to assist in clarification.

    • Relevance – The information must be relevant to the needs of the users,
    which is the case when information influences the financial decisions
    of users. This may involve reporting particularly relevant information,
    or information whose omission or misstatement could influence the

    financial decisions of users.

    • Reliability – The information must be free of material errors and bias,
    and not misleading. Thus, the information should faithfully represent
    transactions and other events, reflect the underlying substance of
    events, and prudently represent estimates and uncertainties through

    proper disclosure.

    • Comparability – The information must be comparable to the financial
    information presented for other accounting periods, so that users
    can identify trends in the performance and financial position of the

    reporting entities.

    • Going concern assumption – When preparing financial statements,
    a public entity is required to assess whether it can be assumed that it
    is able to continue as a going concern. Generally, financial statements
    of a public entity are prepared on going concern basis unless there
    is an intention to liquidate the entity or discontinue business or
    administrative operations or there is no alternative but to do so. Such

    uncertainties must be disclosed.

    • Consistency of presentation – The presentation and classification of
    items in the financial statements must be consistent from one period
    to another unless required otherwise by a significant change in the

    nature of the entity’s operations or a change in one or more IPSASs.

    • Materiality and aggregation – Each material class of items in the
    financial statements must be presented separately. Aggregating items
    of a different nature or function is permitted only if they are immaterial

    individually.

    • Offsetting – Assets and liabilities, and revenue and expenses, may not

    be offset.

    • Comparative information – comparative prior period information
    must be presented for all amounts shown in the financial statements
    and notes to the extent relevant for understanding of the current

    period’s financial statements

    5.3.1. Statement of financial performance

    Statement of performance is a financial report which shows revenues and

    expenditures.

    The following illustrates the format of statement of performance:

    Statement of Financial Performance

    d

    s

    d

    d

    5.3.2. Statement of financial position

    Statement of financial position is a statement showing at a given date, assets

    and liabilities of an entity.

    The following illustrates the format of statement of financial position:

    Statement of Financial Position

    s

    s

    s

    d

    e

    5.3.3. Statement of cash flows

    This statement shows, at a given date inflows and outflows of cash and cash

    equivalent.

    Statement of Cash Flows


    s

    s

    s

    s

    5.3.4. Statement of change in net assets

    Statement of Changes in Net Assets/Equity

    s

    d


    s

    5.3.5. statement of Comparison of Budget and Actual Amounts

    Statement of comparison of Budget and Actual Amounts

    x


    s

    s

    The following notes and schedules should accompany a complete set of
    financial statements:
    i. Accounting policies followed in the preparation of Financial Statements;
    ii. Bank reconciliation statements and supporting copies of bank statements
         for entities;
    iii. Petty cash account certificates;
    iv. Detailed schedules of debtors and other receivables, creditors and other
          payables;
    v. Summary of physical assets extracted and reconciled to the fixed assets
         register and summary of inventory;
    vi. Summary of intangible assets;
    vii. Summary of investments made by the entity to date;
    viii. Summary of consumable inventory;
    ix. Summary of contingent liabilities;
    x. Trial balance;
    xi. A statement showing the purposes of implementation of audit
         recommendations; and
    xii. Any other schedule that will enhance easy understanding of the financial

           statements.

    Application activity 5.3

    Identify the key users of the financial statements for a public entity and

    consider their information needs.

    5.4. Government budget in accordance with the

    requirements of IPSAS24

    Learning Activity 5.4

    Mr GATERA criticized the annual government budget prepared advancing
    the reason that an annual budget is short sighted, he was provided with
    long –term government programs that cover several years and he also
    found them to have a long-term perspective such that there is another tool
    necessary to link the budget to such long-term program.
    Required:
    a) As an accountant, who understands the budgeting process in
    Rwanda, identify for Mr GATERA, a tool used in planning and
    budget process that can serve as a link between annual budget and
    long-term government programs and briefly explain how the tool
    works.
    b) Explain the objectives of the tool used in planning and budget
    process that can serve a link between annual budget and longterm

    government programs.

    5.4.1. Government budgeting

    A budget is a quantitative expression of a plan of action prepared in advance
    of the period to which it relates to. Budgets set out the costs and revenues

    that are expected to be incurred or earned in future periods.

    Purposes of budgeting

    Planning for the future, in line with the objectives of the organization

    Evaluation: To judge managerial performance.

    Controlling costs: To compare with actual results to enable investigations

    into significant differences.

    Coordination of different activities to ensure goal congruence

    Authorization of expenditures

    Motivation of managers by encouraging them to beat targets set at the

    beginning of the budget period. Bonuses are often based on beating budgets.

    Communication: Budgets communicate the targets of the organization to

    individual managers.

    Budgeting in Public Sector

    • Budgeting and financial management are at the core of economic and
    public sector reform programs in most nations around the world.
    With the growing pressures for enhanced service delivery and the
    challenges of budgetary crises and fiscal shocks, the need for improved
    budget processes and innovative financial management techniques is

    especially critical in developing and emerging economies.

    To the government, budget usually serves as:
    • An estimate of revenue and expenditure for a given fiscal year;
    • A guide towards the execution of the year’s activities; and

    • An instrument of evaluating performance.

    Based on the information above, budget in the public sector is normally
    used as an effective instrument for the following.
    • As an instrument for economic policy
    • Instrument for effective management

    • Instrument for evaluating performance

    Approaches to Budgeting
    • Traditional or Incremental Based Budgeting
    • Zero Based Budgeting
    • Program and Planning Based Budgeting

    • Performance Based Budgeting

    5.4.2. International Public Sector Accounting Standards

    (IPSAS)

    The IPSASB develops and publishes the IPSAS. Now, the IPSASB aim to develop
    high quality accounting standards to support public sector entities to prepare
    general purpose financial reporting and improve the quality and transparency
    of financial reporting in the public sector.
    Many IPSAS are based on the International Financial Reporting Standards
    (IFRS) or the former International Accounting Standards (IAS) which tend to
    be adopted in the private sector.
    The following table illustrates IPSAS and corresponding IFRS. IPSAS continue

    to be published. However, as at June 2019 the following are in publication

    s

    s

    s

    s

    s

    s

    s

    s

    s

    s

    s

    s

    s

    As you can see from the table above, many of the IPSAS use different terminology
    to the IAS or IFRS on which they are based. This is perhaps unsurprising as the

    nature of public sector entities also differ.

    You may have also noticed that the final entry in the table is the Cash Basis IPSAS.
    It is worth highlighting that all other IPSAS are based on the accrual method of
    accounting which reflects the IPSASB’s preference for accrual based reporting.
    Indeed, one of the aims of the IPSASB is to move public sector organizations
    from the cash to the accruals basis of accounting and even the cash basis IPSAS

    is intended to be a stepping stone towards achieving accruals reporting.

    Application activity 5.4

    The budget officer of the Ministry of Health is preparing a consolidated
    budget for the financial year 2021/2022. During that exercise one of its

    budget including the following items:

    s

    Required:

    a) Differentiate recurrent from development budgets
    b) Classify the above provided items under recurrent and development

         budget

    Skills Lab 1

    With the teacher, students carry a visit to nearest Public sector entity. They
    ask for some books of accounts held by the entity and available financial
    statements for previous years from the Accountant officer. They observe,

    and share findings thereafter.

    End unit assessment 5

    1. The Government of Rwanda adopted the use of IFMIS as an

    information management tool. The benefits of using IFMIS include:

    i. Enabling government reform and improving efficiency and controls

    ii. Improving confidence through transparency

    A. (i) only

    B. (i) & (ii) only

    C. (i), (ii) & (iii)

    D. (ii) & (iii) only

    2. A government that follows full IPSAS accrual must present a
    statement of financial position that complies with IPSAS for the
    line items presented. The IPSAS that guide the presentation of

    property, plant and Equipment is:

    A. IPSAS 16

    B. 1PSAS 1

    C. IPSAS 19

    D. None of the above

    3. One of the important Public Financial Management (PFM) reforms
    that the government of Rwanda has put in place is the use of
    Integrated Financial Management Information System (IFMIS).
    The implementation of IFMIS came with a lot of benefits but it
    also presents certain risks which include but not limited to lack of

    capacity, weak commitment to change and technical challenges.

    Required:

    Explain any Five (5) internal controls that can be put in place to minimize

    these risks associated with the use of IFMIS

    ◄Unit 4 INTRODUCTION TO NONPROFIT ORGANIZATIONSUnit 6 INTRODUCTION TO COMPANY ACCOUNTS►