Public Sector Accounting and Finance · May 2026

a) Federal Republic of Obudu Statement of cash flow for the year ended December 3,2024 N’000 Receipts: Share of statutory allocation 135,000,000 Value added tax 22,950,000 Personal income tax - Direct tax 105,000,000 Allocation for collection cost 30,750,000 Grants and subvention received 750,000.00 Miscellaneous revenue 3,750,000 Total receipts 298,200,000 Payments: Personnel costs 72,000,000 Consolidated revenue charges 22,500,000 Overhead charges 15,000,000 Subvention to parastatals 18,000,000 Total payments 127,500,000 Net cash inflows from operating activities 170,700,000 Cash flows from investing activities: Sales of federal government properties 10,500,000 Purchases and construction of non-current assets (25,000,000) Purchases of marketable securities (5,000,000.00) Sales of government property 3,750,000 Rent of government property 2,850,000 Net cash outflows from investing activities (12,900,000) Cash flows from financing activities: Proceeds from loans and other borrowing 30,000,000 Repayment of loan (8,700,000) Net cash outflows from financing activities 21,300,000 Net increase in cash and cash equivalents for the year 179,100,000 Cash and cash equivalents January 1,2024 37,500,000 Cash and cash equivalents December 31, 2024 216,600,000

b) Pillar 1- Policy-based fiscal strategy and budgeting A fiscal strategy clearly articulates governments medium term financial objectives to the legislature and the public. It covers policies in the medium term relating to taxation, recurrent (non-debt) expenditure, debt expenditure, capital expenditure, borrowings and other liabilities, lending and investment, its strategic economic, social and developmental priorities for the next three 124 financial years. It also explains how the financial objectives, strategic, economic, social and developmental priorities and fiscal measures set out relates to the economic objectives set out in Section 16 of Nigerian Constitution.

i) Macroeconomic and fiscal forecasting: This indicator measures the ability of governments to develop robust macroeconomic and fiscal forecasts, which are crucial to developing a sustainable fiscal strategy and ensuring greater predictability of budget allocations. It also assesses the government’s capacity to estimate the fiscal impact of potential changes in economic circumstances.

ii) Fiscal strategy: This indicator provides an analysis of the capacity to develop and implement a clear fiscal strategy. It also measures the ability to develop and assess the fiscal impact of revenue and expenditure policy proposals that support the achievement of the government’s fiscal goals.

iii) Medium-term perspective in expenditure budgeting: This indicator examines the extent to which expenditure budgets are developed for the medium term within explicit medium-term budget expenditure ceilings. It also examines the extent to which annual budgets are derived from medium-term estimates and the degree of alignment between medium- term budget estimates and strategic plans.

iv) Budget preparation process: This indicator measures the effectiveness of participation by relevant stakeholders in the budget preparation process, including political leadership, and whether that participation is orderly and timely. It contains two dimensions and uses the average method for aggregating dimension scores.

v) Legislative scrutiny of budgets: This indicator assesses the nature and extent of legislative scrutiny of the annual budget. It considers the extent to which the legislature scrutinises, debates and approves the annual budget, including the extent to which the legislature’s procedures for scrutiny are well established and adhered to. It contains three dimensions and uses the weakest link method for aggregating dimension scores.

c) Events in which financial assets are measured at fair value through net assets.

i) When a public sector entity (PSE) uses its surplus cash to purchase short- term investments, the investments are classified at initial recognition as financial assets fair value through net assets.

ii) Available-for-sale financial assets are included in a non-current asset where a PSE intends to dispose off the investment in a period exceeding 12 months from the reporting date. 125

iii) Regular purchases and sales of financial assets are recognised at fair value on a trade-date (the date in which the entity commits to purchase or sell the assets) and subsequently at fair value with any resultant fair value gains or losses recognised in the statement of net assets.

iv) Realised gains or losses on financial assets fair value through net assets are recognised in the consolidated statement of financial performance as income or expense from the financial assets at fair value through net assets securities.

v) Impairment losses on financial assets fair value through net assets is calculated using the effective interest method and is recognised in the consolidated statement of financial performance as part of expenses.

vi) The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active, the entity shall establish fair value in the valuation techniques.

vii) Entity shall ascertain at the date of preparation of each statement of financial report, whether there is objective evidence that a financial asset or group of financial assets is impaired.

viii) In the case of equity securities classified as available financial assets fair value through net assets, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities have been impaired.

ix) If any such evidence exists for financial assets fair value through net assets, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised is presented in the statement of financial performance.

Examiners’ report The question is in three parts. Part (a) of the question tests candidates’ knowledge on the preparation of statement of cash flows using direct method, while part (b) tests candidates’ knowledge of the Pillar 1 of ICAN-Accountability Index (ICAN-AI) on policy based fiscal strategy and budgeting including indicators of measurement. Part (c) requires candidates to explain the events where financial assets are measured at fair value through net assets under IPSAS 41 on financial instruments. All the candidates attempted the question and their performance was average. The common pitfalls were the inability of the candidates to explainthe Pillar 1 of ICAN-Accountability Index (ICAN-AI) on policy based fiscal strategy and budgeting and identify events where financial assets are measured at fair value through net assets under IPSAS 41 on Financial Instruments. 126 Candidates are advised to have adequate knowledge of the relevant provisions of the syllabus and to make use of the Pathfinder and the Institute’s study text of the Institute for better performance in the Institute’s future examinations.

Marking guide Marks Marks 1a Preparation of cash flows Title 1 Calculation of net cash inflows from operating activities 6 ½ Calculation of net cash inflows from investing activities 3 Calculation of net cash inflows from financing activities 1½ Calculation of net increase in cash and cash equivalents for the year 1 Calculation of net increase in cash and cash equivalents as at December 31 2024 1 14 b Pillar 1- Policy-based fiscal strategy and budgeting Explanation 2 Identification any four indicators 2 Explanation of any four identified indicators 6 10

c. Events in which financial assets are measured at fair value through net assets. Identification any six events 6 Total 30

a) Costs that cannot be attributed to contract activities.

i) General administration costs for which reimbursement isnot specified in the contract. ii) Selling and marketing costs. iii) Research and development costs for which reimbursement is not specified in contract. iv) Depreciation and maintenance costs of idle plant and equipment that is not used on a particular contract. v) Costs associated with wasted materials, excessive labour or other resources that were not initially reflected in the contract price. vi) Any cost that relate to previous satisfied performance obligations.

b) Recognition of contract revenue and expenses

i) Fixed contract price 127 The outcome of a construction contract can be estimated reliably when the following conditions are satisfied:

• Total contract revenue, if any, can be measured reliably.

• It is probable that the economic benefits or service potential associated with the contract will flow to the entity.

• Both the costs to complete the contract and the stage of completion at the reporting date can be measured reliably.

• The contract costs attributable to the contract can be clearly identified and measured reliably so that actual contract costs incurred can be compared with prior estimates.

ii) Cost-based contracts The outcome of a construction contract can be estimated reliably if all the following conditions are met:

• It is probable that the economic benefits or service potential associated with the contract will flow to the entity.

• The costs attributable to the contract, whether or not specifically reimbursed, can be clearly identified and measured reliably.

iii) Percentage of completion method

• Contract revenue is matched with contract costs incurred in reaching the stage of completion, resulting in reporting of revenue, reporting of expenses and surplus or deficit that can be attributed to the proportion of work completed.

• When the outcome of the construction contract cannot be estimated reliably, revenue should be recognised only to the extent of the contract costs incurred that it is probable will be recoverable and contract costs should be recognised as expenses in the period in which they are incurred.

• However, where it is intended at inception of the contract that contract costs are to be fully recovered from the parties to the construction contract, any expected excess of total contract costs over total contract revenue for the contract is recognised as an expense immediately.

c) Key components and benefits of a procurement plan.

i) Key components of a procurement plan

• Requirements definition: Clearly outlining what goods, services, or works are needed, including specifications, quantities, and quality standards.

• Procurement method: Determining the most appropriate procurement method (e.g., competitive bidding, negotiation) based on the nature of the requirements. 128

• Timeline and schedule: Establishing a realistic timeline for each stage of the procurement process, from identifying potential suppliers to contract award and delivery.

• Budget allocation: Detailing the budget allocated for each procurement activity and ensuring it aligns with the overall project or organisational budget.

• Supplier selection: Outlining the process for identifying, evaluating, and selecting suitable suppliers, including criteria for evaluating bids and proposals.

• Contract management: Defining the terms and conditions of the contract, including payment terms, delivery schedules and performance metrics.

• Risk management: Identifying potential risks associated with the procurement process and outlining mitigation strategies.

• Performance monitoring: Establishing mechanisms for monitoring supplier performance and contract compliance.

ii) Benefits of a procurement plan:

• Cost savings: By planning strategically, organisations can identify opportunities for cost reduction and achieve better value for money.

• Improved efficiency: A well-defined procurement plan streamlines the procurement process, leading to faster turnaround times and increased efficiency.

• Reduced risk: By identifying and mitigating potential risks upfront, organisations can minimise disruptions and ensure smooth procurement operations.

• Enhanced transparency and accountability: A procurement plan provides a clear framework for procurement activities, promoting transparency and accountability.

• Alignment with organisational goals: Ensuring that procurement activities are aligned with the overall objectives and strategies of the organisation.

• Time efficiency: Lead time management, fewer delays, materials and services arrive when needed, reducing idle labour and equipment, streamlined process, pre-defined methods, approval paths and cut-off procedures.

• Quality and performance: Clear specifications, defined quality, standards, and acceptance criteria, better supplier selection, evaluation criteria are set before bids come in, reducing favoritism, performance monitoring and contract compliance. 129

• Operational benefits: Avoids stock outs and overstocking, by aligning inventory with project schedule optimising, resource use and storage.

• Strategic value: Supports market engagement, to test prices and supplier capacity which enables selection of contract strategy which help to decide whether to use framework agreements lump sum to improve forecasting, finance and reliable cash flows and expenditure forecasts.

Examiners’ report The question is in three parts. Part (a) of the question requires the candidates to identify costs that cannot be attributed to a contract under IPSAS 11 on “Accounting for Construction and Contract”, while Part (b) of the question tests candidates’ knowledge of the conditions that have to be satisfied in order to estimate reliably the construction contract under fixed price contract; cost-based contract; and percentage of completion contract. Part (c) of the question requires the candidates to identify and explain the key components and benefits of procurement plan. Few candidates attempted the question and their performance was below average. The commonest pitfall was the inability of the candidates to properly understand the requirement of the question. Candidates are advised to make use of ICAN Pathfinders and the study text for better performance in the Institute’s future examinations.

Marking guide Marks Marks a. Costs that cannot be attributed to contract activity Identification of four costs that cannot be attributed to contract activity 4

b. Recognition of contract revenue and expenses Highlighting three conditions for fixed price contract 3 Highlighting two conditions for cost-based contract 2 Highlighting three conditions for percentage of completion contract 3 8 c Key components and benefits of a procurement plan Key components of a procurement plan Identification of four components. 2 Explanation of key components identified 2 Key benefits of a procurement plan Identification of four benefits 2 130 Explanation of key benefits identified 2 8 Total 20

a) Wellbeing Republic Calculation of budget variances and percentage of variances for 2026 Actual 2025 Proposed 2026 Variance % Variance N’000 N’000 N’000 Revenue: Ministry’s share of FAAC (Statutory Revenue) 50,330,000 58,500,000 8,170,000 16.23 Aids and grants 1,300,000 2,250,000 950,000 73.08 Expatriate quota fees 3,500,000 4,750,100 1,250,100 35.72 Marriage services 2,460,300 2,020,500 (439,800) (17.88) Citizenship processing 460,350 805,000 344,650 74.87 Business registration 1,250,000 1,980,000 730,000 58.40 Other revenue 132,200 200,500 68,300 51.66 Total revenue 59,432,850 70,506,100 11,073,250 18.63 Expenditure: Recurrent expenditure: Personnel costs 26,450,000 30,300,000 3,850,000 14.56 Grants and contributions 1,200,000 2,020,000 820,000 68.33 Overhead expenditure 1,100,000 1,320,000 220,000 20.00 Depreciation charges 230,000 400,500 170,500 74.13 Impairment charges 57,500 55,000 (2,500) (4.35) Security expenses on properties 1,200,000 2,250,000 1,050,000 87.50 Procurement: Consumables and services 31,200 25,800 (5,400) (17.31) Total recurrent expenditure 30,268,700 36,371,300 6,102,600 20.16 Capital expenditure: Investment on buildings 3,450,000 6,500,000 3,050,000 88.41 Investment on machinery and equipment 4,500,000 7,200,000 2,700,000 60.00 Investment on technology 3,500,000 4,200,500 700,500 20.01 Investment on aircraft for surveillance 9,300,000 15,500,000 6,200,000 66.67 Total capital expenditure 20,750,000 33,400,500 12,650,500 60.97 Total expenditure 51,018,700 69,771,800 18,753,100 36.76 Budget surplus/(deficit) 8,414,150 734,300 (7,679,850) (91.27)

a) National Chart of Accounts (NCOA) The National Chart of Accounts (NCOA) may be defined as a complete list of budget and accounting items where each item is uniquely represented by a code and 131 grouped into tables of related data for the purposes of tracking, managing and reporting budgetary and accounting items in an orderly, efficient and transparent manner.It is also a created list of codes which can be represented by numeric, alphabetic or alphanumeric symbols. This is to enable the entity to define each item of revenue, expenditure, asset, liability, location and other parameters in order to give interested parties a better understanding of the entity. National chart of accounts structure for budgeting

i) Administrative segment: The administrative classification identifies the entity that is responsible for the public funds projection, such as the Ministry of Education, Health and Women Affairs or, at a lower level, schools and hospitals. ii) Economic segment - The economic classification identifies the type of revenue and expenditure budgeted in a particular period, examples are salaries, goods and services, transfer and interest due. iii) Functional segment - The functional classification or classification by functions of government is a detailed classification of the functions or socio- economic objectives, that general government unit aims to achieve through various outlays. It therefore, organises government activities according to their broad objectives or purposes. iv) Programme segment- The programme classification identifies various set of activities to meet specific policy objectives of the government. For example, pre-primary education, poverty alleviation and food security. v) Funds segment - The fund classification identifies the sources of funding government activities. vi) Geographical segment - The geographical classification is used to identify the geographical location of an entity (MDAs) or a project so that an analysis of government budget along various states and local government areas in the country can be done.

Examiners’ report The question is in two parts. Part (a) of the question examines candidates’ knowledge of the calculation of the variance of each revenue and expenditure, total recurrent expenditure, total capital expenditure, showing the percentage increase or decrease in each case. Part (b) of the question requires the candidates to explain the term “National Chart of Account (NCOA) and also, identify and explain the structures for budgeting with national chart of accounts. Majority of the candidates attempted the question and their performance was above average. 132 The commonest pitfall was the inability of the candidates to properly identify and explain the structures for budgeting with national chart of accounts. Candidates are advised to read widely and ensure they have adequate knowledge of the relevant sections of the syllabus. They should also make use of Pathfinders and the study text of the Instituteand other relevant learning materials on this aspect of the syllabus for better performance in future examinations

Marking guide Marks Marks a. Budget variances and percentage of variances Title ½ Calculation of total revenue variance 2 Calculation of total revenue percentage variance 2 Calculation of total recurrent expenditure variance 2 Calculation of total recurrent expenditure percentage variance 2 Calculation of total capital expenditure variance 1¼ Calculation of total capital expenditure percentage variance 1¼ Calculation of total expenditure variance ¼ Calculation of total expenditure percentage variance ¼ Calculation of budget surplus/(deficit) variance ¼ Calculation of budget surplus/(deficit) percentage variance ¼ 12

b. Explanation and steps for budgeting with national chart of accounts ExplanationofNational Chart of Accounts (NCOA) 2 Identification of any four structures for budgeting with NCOA 2 Discussion of any four structures identified 4 8 Total 20

(a) Sub-division of public goods Public goods can also be subdivided into the following:

i. Pure public goods: They are goods that are perfectly non-rival in consumption and non-excludable. Defense and street lightings are good examples of pure public goods.

ii. Quasi-public goods: These are goods that possess some characteristics of both private and public goods. They are partially non-rivalrous and partially non- excludable. Examples include roads, tunnels and bridges. Markets for these goods are considered to be inefficient. For example, private enterprise could provide some bridges, roads and tunnels if a charging system could be applied which solves the free rider problem.

iii. Merit goods: The concept was introduced in economics by Richard Musgrave as a commodity which is judged to be of immense value to an individual or society and one should have on the basis of need, rather than ability and willingness to pay. Merit goods are those goods and services that the government believes people will under-consume and which ought to be subsidised or provided free at the point of use so that consumption does not depend primarily on the ability to pay for the goods or services. Education and healthcare are good examples of merit goods.

iv. Common-pool resources/Common goods: Overuse of common goods depletes the resource and it is hard to prevent people from using it. For example Fisheries, grazing land, public parks, clean water in a river, internet bandwidth.

v. Club goods / Toll goods: Many people can use it without reducing other users’ benefit. For example cable TV, toll roads, libraries with membership, paywalled databases, private parks. The characteristics of public goods

i. Non-rival consumption: Generally, public goods refer to those goods whose consumption is not in rival relationship. This implies that consumption by one individual will not cause a decline in the benefit that will accrue to other consumers of the same goods. For example, government policy of providing street lightings on roads, defence and adequate policing to make the society crime-free will become beneficial to everyone. It does not matter whether or not everybody is a tax payer. Therefore, consumption of public goods is not competitive.

ii. Non-excludability: Another remarkable feature of public goods is the non-applicability of exclusion principle. Since everyone consumes from the same source of supply, once provided for one individual, the same quantity and quality becomes available to everyone. Divisibility of output into smaller units to meet individual’s demand is not desirable even if it were feasible. Therefore, consumption of public goods is not dependent upon payment, thereby giving room for ’free riders’. The non- excludability condition makes provision of public goods through the market mechanism impossible.

iii. Zero marginal cost: Public goods are characterised by the existence of zero or near zero marginal cost. This means that increase in demand may not necessarily force government to increase supply at least in the short run. Hence, there is no extra cost incurred by the additional demand. For example, increase in the number of vehicles plying a road may not necessitate immediate expansion of the road. Similarly, additional vehicle passing over a bridge is without any additional cost to the society.

iv. Equality of sum of marginal benefits with marginal cost: The marginal cost is usually a measure of benefit (utility/satisfaction) derived by consumers from consumption. In the case of public goods, it is the sum of the marginal benefits derived by each individual that should equal marginal cost. This is so since all consumers consume from the same source of supply.

v. Market provision is efficient: Because of non-rivalry and non- excludability, the price mechanism works. Consumers reveal their preferences by buying, producers respond by supplying. Profit and loss signals guide resource allocation without needing government intervention. This is why we do not have the government selling you shoes or bread. The private market does it better. Characteristics of private goods In the case of private goods produced by the private sector, the characteristics are complete opposite of those of public goods.

i. Rivalrous consumption This is a major feature of private goods. It means that consumption of a particular private good makes it unavailable for another person. Hence, consumption of private goods is competitive. For example, a pair of shoe or glasses worn by the class coordinator is not available to his/her assistant.

ii. Excludability It is a peculiar characteristic of private goods. There are specific conditions that must be satisfied before consumers can enjoy the benefit of private goods. Payment must be made, otherwise market will fail to function efficiently in the production and supply of private goods. Where it is impossible to limit the supply of goods to a particular consumer (exclusion), it will be impossible to charge price and where price cannot be charged or introduced, market fails. The principle of excludability is prevalent when discussing private goods and nothing will be lost while much will be gained when consumers are prevented from consumption unless they pay.

iii. Positive marginal cost. The marginal cost of private goods is positive. Addition to the number of consumers for a particular good will necessitate increase in output which will not be possible without additional cost – marginal cost. Increase in output will be necessary because of the urge to make extra income by the producers of the good in question.

iv. Equality of marginal benefit with marginal cost In the case of private goods, efficiency requires equality of marginal benefit derived by each consumer with marginal cost. The reason being that each individual consumer will pay the same unit price but purchase different quantity.

v. Divisibility: The good can be broken into units and sold to individual consumers. You can buy 1kg of rice, one liter of fuel or one phone. You do not have to buy the whole factory output. Divisibility lets the market match supply to individual demand and willingness to pay.

vi. Market provision is efficient: Because of rivalry and excludability, the price mechanism works. Consumers reveal their preferences by buying, producers respond by supplying. Profit and loss signals guide resource allocation without needing government intervention. This is why we do not have the government selling you shoes or bread.

(b) i. Concept of market failure and public goods Market failure This is the concept used to describe the situation in which the market is no longer efficient in its allocation of resources, while public goods which are collectively consumed, non-rival in consumption and not subject to the exclusion principle. For example, roads, national defence etc.

ii. Validity of the statement

• A developing economy like Nigeria has a market structure that is grossly imperfect. That is, a market structure that cannot guarantee optimal social allocation condition.

• There are many situations which lead to market failure in developing economies. For example, externalities not taken into account by the market systems, cases of imperfect knowledge and immobility of factors of production.

• Public goods, characteristically, give rise to some externalities, both positive and negative, which tend to undermine the efficiency of the market mechanism. For example, negative externalities which include, noise, litter or pollution. On the positive side are the spillover effects of education, health expenditure, road construction projects etc.

• Income distribution obtained via the market is in many cases unequal, especially in developing nations, such as Nigeria. Governmental action is therefore required to redress the gaps between incomes.

(c) Types of fraud in a computer system

i) Manipulation of computer time/access: This is where computer operating time is manipulated with the intention to use the computer for personal advantage at the expense of the organisation. Data in the computer memory may be altered or certain unauthorised operations carried out.

ii) Alteration of master file: Master file may be altered to help unauthorised person achieve his purpose. This is mainly done when there is existing standing order. Detection may be difficult since copy of master file is often kept in off locations.

iii) Alteration to software package: This is an unauthorised amendment or alteration which is made to the software programme to perpetuate fraudulent act. It is one of the most common methods in computer programme-based frauds and sabotage, where instructions in the programme are altered so that the computer will perform unauthorised functions.

iv) Programme patching: This is where attachment is made to the computer programme so that it can jump function or perform unauthorised functions, which the unauthorised person wants it to perform to his own advantage.

v) Interception of transactions: Computer operations can be intercepted between manual and central processing unit. This could happen where on-line system is in operation. Though rare and sophisticated, it is a high form of computer fraud.

vi) Manipulation of input: The input data may be altered or corrupted with a view to altering computer records and may be with an intention to defraud the organisation. This is also known as “data diddling”. It is one of the most common and simplest computer fraud. It involves changing data before or during their input to the computer. This can be done by anybody with access to the computer, for example an operator.

vii) Simulation and modelling: A computer can be used as a tool or instrument of crime planning and execution. Complex white-collar crimes are often perpetrated by using computer system, because of its sophisticated capabilities. An existing process can be simulated on a computer or a planned method for carrying out a crime could be modelled to determine its possible outcome.

Examiners’ report The question is in three parts. Part (a) of the question requires candidates to identify and explain the two subdivisions of public goods and characteristics of public and private goods. Part (b) is in two sections. Section (i) requires candidates to explain the concept of market failure and public goods, while section (ii) requires the candidates to give an opinion whether the statement that ’ the need for government intervention in the economy is justified on the basis of market failure and public goods in the context of a developing nation like Nigeria’. Part (c) of the question requires the candidates to identify and explain types of fraud that can be perpetrated in a computerised system like Government Integrated Financial Management System (GIFMIS). Majority of the candidates attempted the question and performance was above average. The common pitfalls were the inability of the candidates to justify the validity of the need for government intervention in the economy in relation to market failure and public goods. Candidates are advised to read widely and ensure they have adequate knowledge of relevant regulations relating to public sector accounting for better performance in the Institute’s future examinations.

Marking guide Marks Marks a. Public and private goods Identification of two sub divisions of public goods 1 Explanation of sub divisions identified 3 Identification of three characteristics of public goods 1½ Explanation of characteristics identified 1½ Identification of three characteristics of private goods 1½ Explanation of characteristics identified 1½ 10

b. Concept of market failure and public goods Explanation of concept of market failure and public goods 2 Explanation of three valid justifications of the statement 3 5

c. Types of fraud in a computer system Identification five types of fraud 2½ Explanation of five steps identified 2½ 5 Total 20 Section C

a) Advantages of borrowing

i) Rapid economic growth and welfare improvement would be achieved if borrowed funds are utilised to finance economically and socially viable projects.

ii) The confidence of local and foreign investors in the economy would be boosted, if public debt is used to control inflation.

iii) New and additional investment would lead to creation of new jobs and greater output of welfare enhancing goods and services. If borrowed funds are spent on public works, standards of living will improve, especially via creation of new jobs and the transformation of the environment.

iv) Public debt reduces income inequalities, if it is spent on social, security and projects that are of more benefit to the lower income groups.

v) Those who lend money to government by purchasing government securities, instead of keeping idle savings, will become richer as they acquire additional assets to boost their wealth portfolio.

vi) During recessions, government can borrow and increase public spending to stimulate demand, prevent economic collapse and repaying the debt during periods of economic boom.

vii) It prevents immediate, drastic cuts to public services or civil servant salaries during periods when tax collections fall short of expected revenue.

viii) Rather than imposing sudden, heavy tax burdens on citizens to fund emergencies or wars, borrowing spreads the fiscal cost over multiple generations who will also benefit from the expenditures. It provides immediate funds for “disaster relief” during national emergencies, such as pandemics or natural disasters, where immediate spending is critical.

ix) Borrowing allows governments to fund essential long-term investments and maintain public services without immediate tax hikes.

x) It enables “automatic fiscal stabilisers” like unemployment benefits to function even when tax revenue drops. Disadvantages of borrowing

i) Excessive government borrowing within the economy tends to crowd out private investments. That is, government competes with private companies in the financial market and deprive them loanable funds they need to grow their activities.

ii) Tax burden on future generation: Public debt imposes unfair tax obligation on future generation especially when borrowed funds are deployed to fund consumption rather than investment programmes or when such funds are diverted to non-self-liquidating projects or projects that are poorly designed, thereby making execution impossible.

iii) Funding excessive interest rate on public debt in stable foreign currency deprives the nation of foreign exchange needed to procure critical inputs, especially in a country like Nigeria that is highly dependent on import with respect to raw materials required in the industrial sector. This leads to declining industrial capacity utilisation and loss of industrial jobs.

iv) Borrowing comes with conditionalities that may become too stringent for the debtor nation(s), like trade liberalisation, withdrawal of subsidies on essential products, expenditure reduction, non-increase of salary of public servants and other stiff conditions that might have great consequence on living standards of the people.

v) It is an ineffective way of controlling inflation. As a matter of fact, debt servicing may create inflationary effects at a time of full-employment. Specifically, the financing of domestic debt usually causes aggregate demand to increase when creditors bring the income generated through their investment in government securities into circulation.

vi) Debt-servicing problem is aggravated when short and medium-term loans are committed to long-term projects with amortisation becoming due before projects are completed.

vii) Borrowing tends to widen the level of income inequalities, since it is the rich only that can invest in government securities or lend to government and hence benefit from high interest payment.

(b) Key aspects of Sustainable Development Goals (SDG 4) on education:

i) Inclusive and equitable education: SDG (4) strives to ensure that all individuals, regardless of their background or circumstances, have access to quality education.

ii) Lifelong learning: The goal recognises the importance of continuous learning and development throughout life, not just in formal schooling.

iii) Early childhood development: SDG (4) emphasises the need for quality early childhood development and pre-primary education to prepare children for primary school.

iv) Skills for employment: It aims to equip youth and adults with the skills they need to participate in the workforce, including technical, vocational and entrepreneurial skills.

v) Reduced inequalities: SDG (4) focuses on eliminating gender disparities and ensuring equal access to education for vulnerable groups such as persons with disabilities and those in vulnerable situations.

vi) Quality of education: It emphasises the need for quality learning environments, qualified teachers and effective learning outcomes.

vii) Financing for education: SDG (4) highlights the importance of adequate and targeted financing to support education initiatives, particularly in developing countries and for marginalised populations.

viii) Safe learning facilities: Building and upgrading learning facilities that are child disability and gender-sensitive, providing safe, non-violent and inclusive learning environments.

Examiners’ report The question is in two parts. Part (a) of the question requires the candidates to highlight the advantages and disadvantages of borrowing to government. Part (b) of the question requires candidates to identify the key aspects of sustainable development goals on education. Majority of the candidates attempted the question and their performance was average. The common pitfalls were the inability of the candidates to identify the key aspects of sustainable development goals on education. Candidates are advised to make use of Pathfinders and the Study Text of the Institute for better performance in the Institute’s future examinations.

Marking guide Marks Marks a. Advantages and disadvantages of borrowing Highlighting five advantages 5 Highlighting five disadvantages 5 10

b. Key aspects of SDGs on education Identification of any five key aspects 5 Total 15

a) Kosofe State Government Computation of the costs of proposed road project Option A – Direct labour N’000 N’000 Cost of direct materials 340,000 Cost of hired supplementary labour 120,000 Cost of fuel, lubricants and stationery specially for the project 60,000 Estimated cost of repairs of vehicles, plants and equipment to execute the project 240,000 Estimated incidental costs (Note i.) 40,000 Total anticipated costs 800,000 Less: Cost of materials conserved 90,000 Unexpired vehicle repair cost 96,000 186,000 Effective cost of option A 614,000 Option B – Contract N’000 N’000 Contract award fee 780,000 Add: Estimated incidental costs (job specification,bill of quantity etc.) 40,000 Cost of advertisement inviting pubic tenders 20,000 60,000 840,000 Less: Interest earned due to money saved in option A (15% X 8/12 N800million) Note ii. 80,000 Effective cost of option B 760,000

Notes: The costs of job specification, bill of quantity, etc. represent the estimated incidental costs in the total anticipated costs for option A The estimated savings to be invested if the contract award (option B) was adopted is the anticipated cost of N800milion for a period of 8 months, that is, contract duration and delay period in payment. Decision: The State Government is advised to execute the job through direct labour, since the effective cost of that option of N614milion is less than the contract option of N760million

a) Other factors that the state government should consider before a final decision is taken are;

i. Whether or not the quality of work through direct labour will match that of an experienced contractor. ii. The social effect of the possibility of the contractor being out of job as a result of lack of the State Government’s patronage. iii. The tax payable to the government by the contractor on his earnings which have taken into consideration in the cost of computation above. iv. The possibility of cost escalation due to inflation. v. The reliability of the estimated figures used in the comparative studies. vi. The supervisory costs of the direct labour option which are not in the original estimate.

vii. The state should consider all necessary laws concerning project implementation, such as procurement laws and other financial regulations.

Examiners’ report These questions tests candidates’ understanding of committee decision-making evaluating execution option and the key factors government must consider before awarding a contract for a public road project. Majority of the candidates attempted the question and their performance was average. The common pitfall was the inability of candidates to define the factors that the state government should consider before a final decision is taken. Candidates are advised to make use of Pathfinders and the study text of the Institute for better performance in the future examinations.

Marking guide Marks Marks a. Computation of the costs of proposed road project Title ½ Computation of the costs of proposed road project for option A 5 Computation of the costs of proposed road project for option B 3½ Correct decision 1 10 b. Other factors to be considered before a final decision is taken Five other factors to be considered 5 Total 15

Ogogo Orientals Primary Health Care Programme Cost (₦) Effect (Gains in QALYs) Cost Effectiveness(CE) (₦) Ranking Physical exercise programme (A) 500,000 40 500,000/40 = 12,500 4th Mental health program (B) 700,000 200 700,000/200 = 3,500 1st State of the art imaging (C) 1,800,000 400 1,800,000/400 = 4,500 2nd Cancer treatment centre (D) 5,000,000 625 5,000,000/625 = 8,000 3rd The solution starts by implementing the programme with the lowest cost per QALY, and so on. This means choice B will be first made, then C, then D and finally A. However, with a limited budget of ₦5,000,000 the choice will be the following:

i) First implement program B at a cost of ₦700,000 – there will still be ₦4,300,000 left from the budget.

ii) Second, implement program C at a cost of ₦1,800,000 – there will still be ₦2,500,000 left from the budget.

iii) The next program to prioritise is D – however, program D costs ₦5,000,000 and as such only 50% of program D can be afforded and implemented since only ₦2,500,000 is left of the budgeted amount. The resulting QALY gains associated with implementing programs B, C and 50% of D, are: (i) Program B QALYs = 200 (ii) Program C QALYs = 400 (iii) Program D QALYs = 625 x 0.50 = 312.5 Total QALY gains = 200 + 400 + 312.5 = 912.5 Key elements of public sector sustainability reporting

i. Environmental: Reporting on the environmental impacts of public sector activities, including resource consumption, emissions, waste management and climate change adaptation and mitigation efforts.

ii. Social: Disclosing the social impacts of public sector actions, such as access to education, healthcare, housing and social inclusion initiatives, alongside addressing potential social inequalities.

iii. Economic: Communicating the economic impact of publicsector activities, including fiscal sustainability, job creation and economic growth, along with strategies for long-term financial stability.

iv. Governance: Clearly outlining the governance structure and processes related to sustainability reporting, including stakeholder engagement, oversight mechanisms, and accountability structures.

v. Management approach: Describing the public sector body's approach to managing sustainability, including policies, procedures, and organisational structures.

vi. Strategy: Presenting the public sector body's sustainability strategy, including its vision, goals and key priorities.

vii. Performance and targets: Providing data on the performance of the public sector body in achieving its sustainability goals, including key performance indicators (KPIs) and progress towards targets.

viii. Materiality assessment: Identifying and addressing the most relevant sustainability issues for the public sector body and its stakeholders.

ix. Stakeholder engagement: Involving stakeholders in the sustainability reporting process and ensuring their input is considered.

x. Transparency and accountability: Ensuring that sustainability reports are clear, concise and accessible to the public, and that the public sector body is accountable for its actions.

xi. Financial disclosures: Integrating sustainability reporting with financial reporting, including disclosures on climate-related financial impacts and other relevant financial information.

xii. Contextualisation: Aligning the sustainability reporting framework to the specific context of the public sector body, including its mission, objectives and the needs of its stakeholders.

Examiners’ report The questions tests candidates’ understanding of ranking of projects, selection under limited funds and decision-making under capital rationing and the five elements of public sector sustainability reporting. Majority of the candidates attempted the question and their performance was average. The commonest pitfall was the inability of many candidates to highlight key elements of public sector sustainability reporting. Candidates wrote generic sustainability element without linking to public sector framework like IPSAS Global Reporting Initiative (GRI) for public sector and service performance. Candidates are advised to make use of Pathfinders and the study text of the Institute for better performance in the Institute’s future examination

Marking guide Marks Marks

a. Ogogo Orientals Primary Health Care Title ½ Calculation of Cost Effectiveness (CE) for the four programmes 4 Selection of the combination of the programmes 1½ Calculation of total Quality-Adjusted Life-Years (QALYs) 1½ 7½ b Key elements of public sector sustainability Identification of five key elements 2½ Explanation of key elements identified 5 7½ Total 15