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Lesson 5- FUND Accounting

Introduction to management (University of Professional Studies)

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LESSON 5
FUND ACCOUNTING

Redeemer Krah
Thomas Kubaje
Desmond Aboagye
Richard Amoasi-Ando

FUND ACCOUNTING
• What is a fund?
–A fund is a fiscal and accounting entity with self
balancing set of accounts recording cash and
other financial resources, together with all related
liabilities and residual balances, which are
segregated for the purposes of carrying on
specific activities or objective in accordance with
certain regulations restrictions and limitations.
–The process of accounting for earmarked
resources in accordance with certain rules is
termed fund accounting

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Types of Funds
• In general, there are three main categories of fund
– Government /public funds)
– Proprietary fund
– Fiduciary funds
• Government funds
– These are funds that are established for public purpose.
– They include:
• General funds
• Special revenue fund
• Debt service funds
• Capital project funds

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Types of Funds (contd)

• Proprietary funds
– these are funds established for furthering the development of
entrepreneurial skills and business oriented activities.
– They include:
• Enterprise fund
• Internal service fund
• Fiduciary funds
– used to report assets held in a trustee capacity for others and
cannot be used to support the government’s own programs.
– They include:
• Pension funds (eg SSNIT Funds)
• Investment trust funds
• Private purpose trust fund ( eg private scholarship fund administered by
government)

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Types of accounts in funds

• There are two main types of accounts items found in every
fund:
– Above-the-line account items
– Below –the- accounts items
• Above-the-line items
– relate to recurrent revenues and expenditures for the current
period.
– Examples are: taxes, fees and charges, income from investment,
personal emolument, admin expenses, investment activity
expenses, service activity expenses.

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Types of accounts
• Below-the-line accounts items
– relate to financial assets, liabilities and residual balances (or net
asset).
– They are balance sheet items.
– Examples are:
• Loans
• Advances
• Receivables
• Deposits
• Sundry creditors (payables)
• Debts
• Accumulated fund

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Financial Reports of Funds

• Each funds requires to be separated accounted for as an

entity
• Financial reports of funds include:
– Fund statement (receipt and payment statement)
– Revenue and Expenditure statement
– Statement of financial position
– Cash flow statement
– Notes to accounts

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Public funds of Ghana

• The term ‘public fund” refers to the consolidated
fund, contingency fund and any other funds
established by parliament (Article 175of 1992
constitution)
• Thus public funds of Ghana include:
–Consolidated fund
–Contingency Fund
–Other funds

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Consolidated Fund
• The consolidated fund is established by Article 176
&178.
• It is a general fund of government out of which all
withdrawals, except those that are charged on
other funds, are made from in accordance with the
Constitution.
• Consolidated fund is therefore the main fund of
government out of which other splitter funds can
be created.

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Consolidated fund (cont)

• Sources of moneys into the fund
– Article 176 identifies two main sources:
• All revenues and other moneys receive for or on behalf of
government
• Trust monies received for or on behalf of government.
– But not all revenues are paid into the consolidated fund.
– There are two conditions under which revenues will not go to
CF
• When an Act of parliament directs that a specific revenue
should be paid into any other funds
• When a government department is allowed to retain part or
whole of revenues collected on behalf of government to
defray its expenses.

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Consolidated fund (cont)

• Withdrawal from the CF
– There exists strict restriction on withdrawal from the
consolidated fund.
– There are only two conditions for withdrawal from the
consolidated fund.
• Where the withdrawal is made to meet expenditure that
is charged on the fund by the Constitution or by an act
of parliament. (statutory expenditure)
• Where withdrawal of those moneys has been authorized
(discretional expenses)

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Consolidated Fund (cont)

• Withdrawals would be authorized through one of four
means:
–By an Appropriation Act passed by parliament to
approve budget estimates of government.
–By a supplementary estimate approved by
resolution of Parliament passed for that purpose
–By an provisional appropriation or vote on
account which allows for spending prior to the
approval of the budget, (under Article 179 & 180)
–By rules or regulation made by parliament in
respect of trust monies paid into the consolidated
fund
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Consolidated Fund (cont)

• Benefits of CF
–It provides information on the available cash
resources of government at all times
–It helps government to plan its borrowing and lending
requirements
–It also provides flexibility in government spending
since the use of the fund is unrestricted.
–It provides strict control and accountability of public
resources.

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2. Contingency Fund
• It established by Article 177
• It is created to account for urgent or unforeseen
need for which no other provision exists to meet
the need.
• The urgency or unforeseen circumstances may
include natural disaster, social disorder and other
similar events.
• Advances made from the fund should be replaced
as soon as possible by introduction supplementary
estimate to parliament to that effect.

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3. Other funds
• They include:
– District Assembly Common fund
– Ghana Education trust fund
– Road fund
– Venture capital trust fund
– SSNIT fund
– Oil related funds (petroleum holding fund, Ghana Petroleum Fund,
Stabilization Fund)
– Contingency reserve fund
– Sinking fund etc

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District Assembly Common fund

• It established by the District Assembly Common
Fund Act 1993, (Act 455)
• Purpose is to provide resources to support the
developmental activities of the local government.
• It a fund created out of the consolidated fund to
channel resources from the central government
to the local governments for development.

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DACF (cont)
• Sources of moneys into the fund
–7.5% of Total tax revenue is transferred quarterly into
the fund.
–Income from investment of the fund
–Donations and
–Grants
• Expenditures charged on the DACF
–Disbursement to MMDAs/MPs
–Disbursement to RCCs
–Direct expenditures on behalf of MMDAs
–Administrative expenses ( audit fee, bank charges etc)
• It is under the administration of DACFA
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Ghana Education Trust Fund (GETFund)

• GETFund is established by GETFund Act, 2000 (Act
581)
• Purpose is to provide funds for the development
and maintenance of essential academic facilities
and infrastructure in public educational
institutions, especially tertiary institutions.

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GETFund (cont)
• Sources of money
– 2.5% of VAT transferred from the consolidated fund
– Donations and grants
– Income from investment e.g. interest and hostel fees
etc.
• Expenditures charged on GETFund
– Educational infrastructure
– Scholarships
– Student loan scheme
– Faculty development and research
– Facilities such vehicles, Laptops etc

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Road Fund
• It is established by the Road fund Act 1997 (Act 536)
• Purpose is to fund routine, periodic maintenance
and rehabilitation (improvement) of road networks
in the country, and also assist MMDAs in exercising
their functions road related functions under any law.

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Road fund (cont)

• Sources of money
– Highway toll
– International transit fees
– Fuel levy
– DVLA fees eg driver license, vehicle testing and inspection,
vehicle registration etc.
– Other moneys determined by MOF and approved by
parliament.
• Expenditure
– Road maintenance and rehabilitation
– Replacement of road facilities e.g. traffic lights, guard etc
– Road safety activities.

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Venture Capital trust Fund

• It is established by the VCTF Act 2004, (Act 680)
• Purpose is to provide financial resources to be
invested in the SME sector and to develop and
promote a viable venture capital industry in the
country.

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VCTF (cont)
• Moneys into the fund
–25% of NRL (now abolished)
–Fees and charges
–Budget allocation determined by MOF
• Expenditures
–Provision of credit and equity financing to eligible
venture capital financing companies
–Provision of monies to support other activities and
programs for the promotion of venture capital
financing.

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Social Security and National Insurance Trust

Fund
• It was established Social security Act 1991 (PNDCL 247)
now replaced with National Pensions Act 2008, (Act
766)
• Purpose is to operate the basic national social security
scheme and other schemes as determined by law on
the recommendations of the NPRA.
• It is a pension fund

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SSNIT Fund (cont)

• Moneys into the fund
– 13.5% of social security contribution of all contributors
(workers in Ghana),
– Income from investment
• Expenditures
– Payment of pension and related benefits
– Transfer of 2.5% to NHIS
– Investment
– Administrative and other expenditures allowed by the
law.

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Oil Related Fund

• The Petroleum revenue management Act 2011 (Act 815)
established three main fund:
–Petroleum Holding Fund
–Ghana Petroleum Fund consisting of:
• Stabilization Fund
• Heritage fund

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Petroleum Holding Fund

• The PHF is established to receive and disburse petroleum
revenues due to the state.
• All petroleum revenues are required to be deposited into
the PHF with BOG for subsequent transfers to the
stabilization fund, heritage fund and the consolidated fund
• Restrictions on the use of PHF
– It cannot be used provide credit to government
– It cannot be used as a collateral for debt, guarantees,
commitments or other liabilities.

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PHF
• Receipt into the PHF include:
– Royalties for oil and gas etc
– Revenues from direct or indirect participation in
petroleum operation
– Corporate income taxes from upstream and midstream
petroleum companies
– Taxes, royalties, dividends by national oil company
(GNPC)
– Other related receipts

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PHF
• Disbursement from PHF include:
– To consolidated fund to finance budget (not more than 70%)
– To Ghana Petroleum Fund
– To exceptional deductions approved by parliament.

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Ghana Petroleum Fund

• It a collective name for stabilization fund and heritage fund.
• Ghana Stabilization Fund
– It is a fund established to cushion the impact of or sustain public
expenditure capacity during period of unanticipated petroleum
revenue shortfall.
– An approved percentage is transferred from the PHF to the GSF.
• Ghana Heritage Fund
– It is created to provide an endowment to support the development
for the future generations when the petroleum resources have been
depleted.
– Any excess petroleum revenues in a particular are payable into this
fund
– An approved percentage is transferred from the PHF to this fund

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Others miscellaneous funds

• Sinking fund
–Special fund for the redemption of loans and
acquisition of assets
–Authorized under the Loan Act 1970,(Act 335)
• Contingency Reserve Fund
–Normal appropriation that is reserved by executive to
address Virement need of MMDAs.
• Revolving fund.

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TRIAL QUESTIONS
1. What constitute public funds of Ghana?
2. All revenues are to be paid into the Consolidated fund. Give the
two circumstances in which revenues collected for or on behalf
of government would not be paid into the Consolidated Fund?
3. Explain four (4) means of authorizing withdrawal from the
Consolidated Fund.
4. Outline three (3) benefits for creating and maintaining the
Consolidated Fund?
5. What is the purpose of the Contingency Fund? [
6. What is the purpose of the Road Fund? Give five sources of
money to the Road Fund under the Road Fund Act 1997.
7. Give five (5) areas of expenditure of the GETFund

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