- 20 Marks
PSAF – L2 – Q4.2- General purpose financial reporting framework
Question
(a) Financial reporting is an obligation of every entity; however, “it is not an end in itself but a means to an end.”
Required:
Discuss the statement “it is not an end in itself but a means to an end,” relating it to the objectives of financial reporting in the public sector.
(b) Unity Hospital is a regional public hospital established by an Act of Parliament and operated under the National Health Services. It serves the health needs of the region as a referral hospital. The hospital raises money for its operations from the Government of Unity subvention, user charges, bank facilities, and foreign donors, including the Universal Fund, which always requires customised financial reports on a quarterly basis. Its accounts are audited annually by the Auditor General, who reports findings to Parliament. Due to the critical role of the hospital, the media and civil society organisations pay serious attention to its activities and frequently report on their performance. The hospital also has a very proactive labour union.
Required:
(i) Identify and explain the information needs of four primary users of the financial reports of Unity Hospital.
(ii) Discuss the application of general purpose financial reporting and special purpose financial reporting in Unity Hospital.
Answer
(a)
The objectives of financial reporting by public sector entities are to provide useful information about the entity to users of GPFRs for accountability purposes and decision-making purposes. Financial reporting should therefore provide useful information for accountability and decision-making purpose. Financial reporting is not an end in itself. Its purpose is to provide information useful to users of GPFRs. The objectives of financial reporting are therefore determined by reference to the users of GPFRs, and their information needs.
(b)i Primary users are service recipients and their representatives and resource providers and their representatives of Unity Hospital. These include:
- Clients need information to ascertain:
- Cost of services delivered by government
- Sustainability of public service delivery
- Accountability for public resources
- Compliance with legally adopted budget
- Effectiveness and efficiency in public service delivery.
- Parliament (representative of clients) need information to assess:
- Accountability of the public officials
- Compliance with rules and the national budget
- Monitor and evaluate budget implementations
- Multilateral and Bilateral Donors (such as Universal Fund) need information to assess:
- Accountability for donor funds
- Compliance to the terms and conditions of grants
- Lenders and creditors need information to assess:
- Long term financial sustainability of the government’s operations b(ii) The hospital should prepare a general purpose financial report to serve the needs of its primary users. The financial report should comply with the International Public Sector Accounting Standards (IPSAS) and the relevant laws.
Unity could also prepare special purpose financial reports to serve the needs of those users who has the right to the information such as the donors such as Universal Fund. In such situation, the reports are prepared to meet the requirements of the particular user
- Long term financial sustainability of the government’s operations b(ii) The hospital should prepare a general purpose financial report to serve the needs of its primary users. The financial report should comply with the International Public Sector Accounting Standards (IPSAS) and the relevant laws.
- Tags: Financial Reporting, General purpose, IPSAS, Public Sector, Special purpose
- Level: Level 2
- Uploader: Salamat Hamid