i) Merit of Disclosure of Budget Information in Financial Statements:

• The first ground for disapproving the financial statements is that it discloses the budget information in the financial statement which the committee finds unacceptable. This ground of rejection is weak and unfounded as the International Public Sector Accounting Standards 24 (IPSAS 24) provides for the presentation of budget information in the general-purpose financial reports. IPSAS 24 requires a comparison of budget amounts and the actual amounts arising from the execution of the budget to be included in the financial statements of entities that are required to, or elect to, make publicly available their approved budget(s) and for which they are, therefore, held publicly accountable. Compliance with the requirements of this standard will ensure that public sector entities discharge their accountability obligations and enhance the transparency of their financial statements by demonstrating compliance with the approved budget(s) for which they are held publicly accountable and, where the budget(s) and the financial statements are prepared on the same basis, their financial performance in achieving the budgeted results. Therefore, the position of the Finance and Administration Sub-Committee is not in tandem with the requirements of the Standards.

ii) Evaluation of the Quality of the Financial Statement:

• The Conceptual Framework of general-purpose financial reporting provides for the assessment of the quality of financial statements using the qualitative characteristics (QCs) of the financial statement, which include relevance, faithful representation, timeliness, understandability, comparability, and verifiability. Therefore, the appropriate framework for assessment is QCs Framework:
  • Relevance: Financial and non-financial information is relevant if it is capable of making a difference in achieving the objectives of financial reporting. Financial and non-financial information is capable of making a difference when it has confirmatory value, predictive value, or both. In the case, the financial statements presented are capable of helping users to confirm the outcome of resource management strategies during the period, and to predict an entity’s ability to respond to changing circumstances and anticipated future service delivery needs. Thus, based on the available information, the financial statement is relevant.
  • Faithful Representation: To be useful in financial reporting, information must be a faithful representation of the economic and other phenomena that it purports to represent. Faithful representation is attained when the depiction of the phenomenon is complete, neutral, and free from material error. In this case, there is no evidence of omission, bias, or material error in the financial statement therefore the statement is assumed to be faithfully represented. However, the cash flow statement is conspicuously missing in the set of the financial statements, which may negatively affect the completeness of the information.
  • Timeliness: Timeliness means having information available for users before it loses its capacity to be useful for accountability and decision-making purposes. Having relevant information available sooner can enhance its usefulness as input to assessments of accountability and its capacity to inform and influence decisions that need to be made. A lack of timeliness can render information less useful. Under the Public Financial Management Act 2016, covered entities are required to submit their financial statements to relevant authorities within two months after the end of the financial year. In this case, the financial statement was submitted on February 15, 2021, and therefore it can be said to be timely.
  • Understandability: Understandability is the quality of information that enables users to comprehend its meaning. GPFRs of public sector entities should present information in a manner that responds to the needs and knowledge base of users, and to the nature of the information presented. Understandability is enhanced when information is classified, characterized, and presented clearly and concisely. Comparability also can enhance understandability. In the current case, understandability is undermined by the lack of notes to the accounts which will provide information on the accounting policy used and how the figures are aggregated. Therefore, the financial statement is limited in providing understanding to the users.
  • Comparability: Comparability is the quality of information that enables users to identify similarities in, and differences between, two sets of phenomena. The financial statements provided budget and corresponding actual amounts for purposes of comparability. Thus, it meets the requirement of comparability.
  • Verifiability: Verifiability is the quality of information that helps assure users that information in GPFRs faithfully represents the economic and other phenomena that it purports to represent. It implies that different knowledgeable and independent observers could reach general consensus that information represents the economic and other phenomena that it purports to represent without material error or bias; or an appropriate recognition, measurement, or representation method has been applied without material error or bias. In this case, the financial statements are submitted together with an audit opinion which indicates that there is some level of verification. However, the kind of audit opinion raised on the financial statement is unknown from the available data therefore the verifiability cannot be conclusively assessed.