TYPES OF FUND

The various fund systems in government accounting are enumerated as follows:

(a) Public Funds

In accordance with Article 175 of the Constitution and Section 5 of the FAA, the public funds of Ghana consist of the Consolidated Fund, the Contingency Fund and such other funds as may be established by or under an Act of Parliament.

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Examples of funds established by Act of Parliament are:

The Road Fund, 1997 (Act 536)

The Ghana Education Trust Fund, 2000 (Act 581) District Assemblies Common Fund, 1993 (Act 455) Ghana Investment Fund, 2002 (Act 616)

Venture Capital Trust Fund, 2004 (Act 680) Business Assistance Fund

HIPC Fund

Social Investment Fund

The term Public Funds is the generic term used to describe all public monies. It is the summation of all funds established by the Constitution, Acts of Parliament or under the authority of an Act of Parliament. The Consolidated Fund, Contingency Fund, Road Fund are subsets of the Universal Set of Public Funds

(b) The (General) Consolidated Revenue Fund

The Consolidated Fund is the Fund that holds all forms of monies that belong to the Central Government except revenue and other moneys:

(i) payable by or under an Act of Parliament into some other Fund

established for a specific purpose (i.e. Contingency Fund, Road Fund, etc;

or

(ii) that may, under an Act of Parliament, be retained by the department or

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agency of Government that received them for the purpose of defraying the expenses of that department or agency.

This means that revenues collected and payable into Road Fund, GETfund, or any other fund legally established and any monies collected and legally retained by MDAs that collected them do not form part of the Consolidated Fund – See Article 176 (1) and (2) of Constitution and Section 6 (1) and (2) of the FAA.

In Nigeria, Section 120 of the 1999 Federal Constitution specifies the Consolidated Revenue Fund as the main Fund of the Federal Government into which all revenues generated for the State should be paid into, and out of which all legally authorised expenditures should be paid from.

(c) The Contingency Fund

This is the Fund established for any unbudgeted expenditure which comes up as very urgent or were unforeseen during the budgeting period, for instance for unexpected flood disaster, or outbreak of some disease in certain part of the Nation. The Constitution provides that moneys voted for the purpose shall be paid into the Contingency fund and advances may be made from that Fund which are authorised by the committee responsible for financial measures in Parliament whenever that committee is satisfied that there has arisen an urgent or unforeseen need for expenditure for which no other provision exists to meet the need.

Furthermore where an advance is made from the Contingency Fund, a supplementary estimate shall be presented as soon as possible to Parliament for the purpose of replacing the amount so advanced. The fund if established is under the Finance Committee of Parliament and not the President nor Minister responsible for Finance.

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Parliament in Ghana is expected to vote moneys to be transferred into such Fund and to be used at any time when any of such contingencies arise (Article 177).

In Nigeria, the setting up of such Contingency Fund is authorised in Section 123 (1) of the Federal Constitution.

(d) Contingency Reserve Fund

It is that part of the normal approved appropriation which is set aside by the Executive. It is normally part of the planned expenditure (possibly a certain percentage of all estimates or votes), which is deducted and reserved, with the aim of helping out any spending organisation in the future to meet any unexpected spending.

This reserve is within the control of the Executive and can help out a spending organisation in the event of the need for extra funds, and reduce significantly the problem of going through either supplementary request from the Legislature or the issue of looking for areas for possible virement.

This can be a good way to plan for any unexpected shocks, though its existence can also encourage misuse of funds especially when the reserve swells over the years and proper guidelines and control for its use are not effected.

(e) Internally Generated Funds

This means revenue generated from the activities of a government agency from its operations other than taxes collected by the Revenue Agencies and includes non-tax revenues.

(f) Capital Project Fund

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This fund is established into which moneys are accumulated to undertake projects or for the acquisition of capital assets.

(g) National Loans Fund

Where the policy of the government is to keep such separate account, it accounts for the receipts of loans that are contracted, both foreign and local and the payments of interest on such loans and the repayments of the principal sums.

Transfers are made out of this into consolidated fund to meet any budget deficits.

Monies for the loan liquidation in terms of both principal and interest payments are also made from the consolidated fund into this account.

(h) Trust and Agency Fund

This fund is established to hold moneys that the government holds in trust for some institution or body. Government holds this money as a trustee or an agent to the owner. Example can be moneys that the government holds from International bodies as rewards to the National armed forces for International peacekeeping assignment.

(i) Debt Service Fund/Sinking Fund

This special fund is kept as alternative to Loans Fund, where the policy of the government is to keep any loan contracted in the Consolidated Fund. The Fund is for the service of both the principal and interest payments hence transfers into this are purely moneys from the Consolidated Fund necessary for the principal and interests payments.

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Alternative to this is the creation of a Sinking fund into which amount is paid annually for a specific loan redemption with the annual payment calculated in such a way that the annual payment (the principal) plus the interest earned which is reinvested will be sufficient for the future liquidation of the loan.

When a loan is due for repayment, Bank of Ghana and Accountant General arrange for the liquidation of the Fund i.e. the sale of investments to make money available. If at any time the amount realised is less than the required for the loan liquidation, transfers are made from the Consolidated Fund to balance up.

(j) Counterpart Fund

This is a fund, which is set established by governments and is used to support projects which are funded by foreign doNations. Foreign doNations can be made either by cash or at times by goods. Where donors at times donate goods rather than giving physical cash towards some specific projects such fund is created for any moneys generated from such goods. The government makes a contribution in addition to the foreign doNations, towards the completion of the project.

(k) Intra-governmental Service Fund

A fund can be created as a unit with a central function of providing some basic services among government organisations or departments to ensure economy and efficiency. A stationery depot can be established within a government publishing house to supply various departments with their stationery needs.

(l) Revolving Fund

Such fund is an established fund out of which spending organisations can „borrow‟

monies for particular project or activity which is sold later and once sold, the monies generated are paid back into the fund. For instance the Ghana Education

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Service can access such funds to purchase textbooks for some secondary schools, which funds can be replaced once the books are sold and paid for by the students.

(m) Local Government Fund

This Fund is established specifically for the activities of the local government, to be used by the local authorities established for the social and economic development of the individual localities and districts. This can be seen as the district assemblies‟

common fund in Ghana. In Ghana, the local government structure is made up of metropolises, municipalities and districts.

(n) The District Assemblies‟ Common Fund

This Fund is a separate fund from all other revenues that can be generated by the districts to supplement other government revenues for the general activities of the districts.

This is the local government fund in Ghana which the 1992 Constitution (Section 252) authorised to be established.

The District Assemblies‟ Common Fund (DACF) was established in 1993 by an Act of Parliament, Act 455.

The Act defines the DACF as "…all monies allocated by Parliament... and any interest and dividends accruing from investments of monies from the Common Fund".

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Moneys to be paid into the DACF should be at least 5% of the total annual revenue of Ghana, which moneys are to be paid in quarterly instalments into the Fund.

An appointed DACF Administrator oversees the use of such Fund and has the responsibility to recommend annually to Parliament a way for the distribution of the Fund among the various districts.

A separate bank account, the Common Fund Account, is opened for each district to hold the monies that are transferred by the DACF Administrator.

The DACF is to be used for developmental projects in the districts and a district is expected to prepare a supplementary budget, a development budget for approval before moneys can be used from the fund.

Copies of the supplementary budgets are to be distributed to Regional Coordinating Councils, Minister of Finance, Minister of Local Government and Rural Development, the Development Planning Commission, the Common Fund Administrator.

A copy of the budget is sent to the bank where the Common Fund Account of the district is kept.