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Government Financial Reports Overview

Chapter Five discusses the role of governmental accounting in providing financial reports and statements to assist management in decision-making and ensure accountability to external users. The FGE accounting system produces an annual budgeted revenue and expenditure report, with plans to develop additional financial statements in the future. Key components of the financial reports include summaries of revenue, expenditure, and detailed schedules supporting these summaries.

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14 views3 pages

Government Financial Reports Overview

Chapter Five discusses the role of governmental accounting in providing financial reports and statements to assist management in decision-making and ensure accountability to external users. The FGE accounting system produces an annual budgeted revenue and expenditure report, with plans to develop additional financial statements in the future. Key components of the financial reports include summaries of revenue, expenditure, and detailed schedules supporting these summaries.

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mebrat88
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Chapter Five

Financial Reports and Financial Statements


Introduction: The system primary purpose of a governmental accounting is to provide
information. Information in the form of financial report is produced to assist management within
government make decisions. Management decisions that are aided by financial reports include:
 Assessment of fiscal responsibility
 Assessment of goal achievement and
 Evaluation of future needs.
Information in the form of financial statement is produced for external purpose to hold
government accountable for stewardship over public resources and evaluate consequences of
government decisions. The major external users of financial statements are legislatives, donors,
lenders and the public. Transparency in government begins with full and fair disclosure of
financial information.
The FGE accounting system produces one financial report on budgeted revenue and expenditure
annually. In the future, two financial statements for external users will be developed as the
accounting system develops: a statement of changes in cash position and balance sheet. The
preparation of statement of changes in cash position and balance sheet, including Notes to the
financial statement, is a goal. The goal and the process for achieving the goal also are described
in this unit.
3.1 Statements of budgeted revenue and expenditure
One set financial reports is produced and published by FGE .MOFED compiles a Budgetary
Revenue and expenditure report annually.
The report contains:
 Three summary reports as follows
o Summary of revenue and external funds.
This report summarizes budgeted revenue in three categories by use and source of
financing as follows:
 Ordinary revenue. This is a summary of budgeted domestic revenue
collected for recurrent expenditure categorized by type of tax or income.

1
 External assistance. This is a summary of budgeted revenue from external
assistance provided for recurrent expenditure categorized by grants and
technical assistance.
 Capital revenue. This is summary of budgeted revenue provided for
capital expenditure categorized by domestic source, external loans
managed by counterpart fund and other external loans.
o Summary of budgetary expenditure. This report summarizes total budgeted
recurrent and capital expenditure by sector and total subsidy to regions.
o Government expenditure and its financing. This report summarizes the uses and
sources of budgeted funds as follows:
 Budgeted expenditure from the summary of budgetary expenditure by category
(recurrent, capital and subsidy to regions) and, within category, by broad sector
category.
 Financing from
- The summary of revenue and external funds by category (domestic.
external assistance and borrowing) and, within category, by source
category.
- Domestic loans that are unbudgeted that state the net amount during
the year of :
Direct advances from the national bank of Ethiopia
Treasury bill, and
Change in cash balance
 Three detail schedules to support each summary as follows
o Revenue schedule. This schedule supports the summary of revenue and external
funds .Budgeted revenue is listed by revenue account code with details of original
budget, actual revenue and the difference.
o Ordinary expenditure schedule. This schedule supports the summary budgeted
expenditure. Budgeted recurrent expenditure for each budgetary institution and
region is listed by expenditure account code with details of original budget,
revised budget, actual expenditure and the difference.

2
o Capital expenditure schedule – all sources .This schedule supports the summary
of budgetary expenditure .budgeted capital expenditure are listed by budgetary
institution with details of original budget , revised budget , actual expenditure and
the difference.
 Three appendices that provide detail of capital expenditure by source of financing as
follows
o Capital expenditure. Appendix I Domestic. This schedule supports the capital
expenditure schedule. Budgeted capital expenditure from domestic funds listed by
budgetary institution with details of original budget, revised budget, actual
expenditure and the difference.
o Capital expenditure. Appendix II Foreign loans. This schedule supports the capital
expenditure schedule. Budgeted capital expenditure from external loans is listed
by budgetary institution with details of original budget, revised budget, actual
expenditure and the difference.
o Capital expenditure. Appendix III External Assistance. This schedule supports the
capital expenditure schedule. Budgeted capital expenditure from external is
assistance listed by budgetary institution with details of original budget, revised
budget, actual expenditure and the difference.

3.2 Statement of changes in cash position

A statement of changes in cash position is the basic financial statement for modified cash basis
accounting system. It is the financial statement most appropriate for the modified cash basis
accounting used in the FGE accounting system.

Common questions

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Financial reports assist in assessing the fiscal responsibility of a government by presenting a detailed account of anticipated and actual revenue and expenditures. These reports facilitate the evaluation of whether the government adheres to its budget plans, efficiently utilizes funds, and maintains fiscal discipline .

The planned future developments in the governmental accounting system include the creation of a statement of changes in cash position and a balance sheet. These statements aim to provide more comprehensive accountability for public resources and a clearer evaluation of government decisions .

The government expenditure and its financing report includes budgeted expenditure from the summary of budgetary expenditure by category (recurrent, capital, and subsidy to regions) within a broad sector category, and financing from the summary of revenue and external funds by category (domestic, external assistance, and borrowing), along with domestic loans that are unbudgeted .

Supporting schedules and appendices enhance the clarity of financial reports by providing detailed information that substantiates summary figures. They break down revenue and expenditure data by categories, such as revenue account code or budgetary institution, which allows for more thorough scrutiny and understanding by internal and external stakeholders .

The Statement of Changes in Cash Position serves as the basic financial statement for the modified cash basis accounting system used by the FGE, providing a summary of cash inflows and outflows essential for evaluating the government's cash management policies .

The budgeted capital expenditure is reported and categorized into three appendices: Appendix I for domestic sources, Appendix II for foreign loans, and Appendix III for external assistance, with details on original budget, revised budget, actual expenditure, and the difference provided for each source .

Full and fair disclosure in government financial reporting is critical for ensuring transparency, allowing external users to hold the government accountable, and enabling informed decision-making by providing clear information on the government's financial position and the implications of its decisions .

Financial statements serve external users by holding the government accountable for stewardship over public resources and evaluating the consequences of government decisions. The major external users identified are legislatives, donors, lenders, and the public .

The MOFED summarizes different categories of revenue and fund sources into ordinary revenue, external assistance, and capital revenue. This categorization, along with detailed schedules, provides clarity on the origin and application of funds, enhancing accountability and enabling stakeholders to understand funding structures and financial health .

The primary purpose of governmental accounting in producing financial reports is to assist management within government in making decisions such as assessing fiscal responsibility, goal achievement, and evaluating future needs .

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