Examkin

Question

Difficulty: Very hardStructure of Government Funds

At the beginning of a fiscal year, a state government recorded an opening balance of ₦45,000,000\text{₦}45,000,000 in its Consolidated Revenue Fund (CRF). During the year, the state received ₦120,000,000\text{₦}120,000,000 as Statutory Allocation from the Federation Account, ₦35,000,000\text{₦}35,000,000 in Internally Generated Revenue (IGR), and ₦15,000,000\text{₦}15,000,000 in external capital development grants earmarked specifically for hospital construction. Approved recurrent payments from the CRF comprised ₦40,000,000\text{₦}40,000,000 for Consolidated Revenue Fund Charges and ₦65,000,000\text{₦}65,000,000 for personnel and overhead expenses. Additionally, an advance of ₦6,000,000\text{₦}6,000,000 previously drawn from the Contingencies Fund for emergency flood relief was reimbursed from the CRF following a Supplementary Appropriation Act. If 50%50\% of the net recurrent surplus for the year was statutorily transferred from the CRF to the Capital Development Fund (CDF), what is the closing balance of the Consolidated Revenue Fund (in Naira) at the end of the fiscal year?

Answer: 67000000 NGN

Answer

67000000
The closing balance of the Consolidated Revenue Fund is determined by adding the net recurrent surplus (₦44,000,000) to the opening balance (₦45,000,000) and subtracting the statutory transfer to the Capital Development Fund (₦22,000,000), giving ₦67,000,000. Capital grants (₦15,000,000) are excluded from CRF revenue as they accrue directly to the Capital Development Fund, while the Contingencies Fund reimbursement (₦6,000,000) must be included as a CRF recurrent outlay.

Step-by-Step Solution

1
Identify recurrent receipts belonging strictly to the Consolidated Revenue Fund (CRF)
Total Recurrent Revenue = ₦120,000,000+₦35,000,000=₦155,000,000\text{₦}120,000,000 + \text{₦}35,000,000 = \text{₦}155,000,000
Statutory allocations and IGR are general revenue items of the CRF. Earmarked capital grants of ₦15,000,000\text{₦}15,000,000 accrue directly to the Capital Development Fund (CDF) and must not be added to CRF recurrent receipts.
2
Calculate total authorized recurrent outgoings from the CRF
Total Recurrent Outgoings = ₦40,000,000+₦65,000,000+₦6,000,000=₦111,000,000\text{₦}40,000,000 + \text{₦}65,000,000 + \text{₦}6,000,000 = \text{₦}111,000,000
CRF charges, personnel/overhead costs, and the statutory reimbursement to the Contingencies Fund (authorized by a Supplementary Appropriation Act under Section 83 of the Constitution) are all outlays charged against the CRF.
3
Calculate the Net Recurrent Surplus for the fiscal year
Net Recurrent Surplus = ₦155,000,000−₦111,000,000=₦44,000,000\text{₦}155,000,000 - \text{₦}111,000,000 = \text{₦}44,000,000
Net Recurrent Surplus is the excess of total CRF recurrent receipts over total CRF recurrent outlays for the operating period.
4
Calculate the statutory transfer from the CRF to the Capital Development Fund (CDF)
Transfer to CDF = 50%×₦44,000,000=₦22,000,00050\% \times \text{₦}44,000,000 = \text{₦}22,000,000
Public finance regulations dictate transferring the authorized percentage of the net recurrent surplus into the CDF to fund capital assets.
5
Determine the final closing balance of the Consolidated Revenue Fund
Closing Balance = ₦45,000,000+₦44,000,000−₦22,000,000=₦67,000,000\text{₦}45,000,000 + \text{₦}44,000,000 - \text{₦}22,000,000 = \text{₦}67,000,000
The closing balance equals the opening balance plus the net recurrent surplus generated during the year minus the statutory transfer out to the CDF.

Key Concept

Calculation of Consolidated Revenue Fund balance taking into account recurrent revenue classification, Contingencies Fund reimbursement, and statutory transfers to the Capital Development Fund.
Rate this question

Topics

Structure of Government Funds

More questions from this topic