Unit 5

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 legislative, 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.

5.1 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
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.
 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.
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.

5.2 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