How accountability and reporting tie to

financial management?
Accounting framework is at the heart of (is essential for) financial
management: deals with the numbers. Accounting communicates financial
information with internal stakeholders (Management accounting) and with Accounting
external stakeholders (Financial accounting) through financial reports framework
Financial management: budgeting, planning, controls and decision Financial Management
The Accounting cycle steps lead to the development of the financial reports
Financial Reports communicate financial information about the organization
in a manner acceptable to the external stakeholders. The
Accounting
The financial reporting is an important tool of Accountability Cycle

Let’s learn how! Financial Reports

What is Accountability?
 Accountabilityis the requirement to explain and accept responsibility for
carrying out an assigned mandate in light of agreed-upon expectations 1.
 Accountability is about evaluating performance, meeting legitimate
standards, fulfilling legitimate commitments and holding responsible those
who fail to meet the standards2.
 Some individuals or defined groups are held responsible for a set of
activities that correspond to their actual span of control and capacity to act 3.
What is the importance of Accountability?
 It is particularly important in situations that involve public trust.

Question: Is this the only concern? Can organizations benefit from a

commitment to accountability?
A commitment to accountability should be thought of not only as
answering to external audience, but also as a constructive tool for
organization, development, enhancing management practices , self-
evaluation and strategic planning.
Accountability Types
i) Executive accountability applied to the internal
management of the organization:

ii) External accountability related to external

stakeholders
Accountability Types: Executive
i) Executive accountability1 applied to the internal management of the organization:
encompass operational processes, management control, the effectiveness of those
controls, the efficiency with which the organization carries out its work and its
adherence to the laws and requirements for probity
Accountability is to: service recipients (patients/ clients), service providers (staff)2
Managers are accountable for :
• Efficiency and effectiveness of services
• Sustainability of delivery
• Reporting
Accountability Types: External
External accountability related to external entities: to report to the authority on the
execution of the responsibilities that the organization has received from them; to be subject to
scrutiny, questioning and formal review.
Accountability is to: boards of directors, legislatures, general public

Financial reporting has to contribute:

◦ Accurate formal financial statements to match actual budget
◦ Timely information
◦ Linking the cost to the program outcomes
◦ Accuracy and transparency in reporting to ensure confidence in the numbers being reported.
But, accountable for what?
There are 3 broad accountabilities regarding the financial affairs of the
organization:
1. Performance: Did the organization perform in accordance with its financial
plan? Actual versus budgeted results.
2. Forward Impacts: To what extent the current activities and results have an
effect on future activities and results? Surplus, deficit, risks
3. Financial condition: based on accurate financial reports, reporting on net
assets, cash flow, liabilities. Reporting on the sustainability of the entity
The Accountability Dynamic- how it works?
1. Assignment of authority, power and resources: downward delegation of duties to an
individual organization through contracts, budget distribution.
2. Accountability for performance and results: in accepting the authority, power and resources,
the individual or organization also takes on the responsibility to perform the work and
account for the results.
3. Assignment of Duties: the granting authority provides clear direction and resources
consistent with the expectation
4. Requirement to report: on results achieved, compliance to legal requirements and efficiency
5. Judgement exercised: the granting authority has the right to make judgements about how
the accountability has been exercised and act on that judgement
Does accountability just happen!

NO, accountability does not just happen ;)

There are steps that should be put in place in order for

the organizations to be held accountable

Questions:
Does the government have a role in accountability? Y/N
If yes, what is their role?

Note. From Andrew Graham,2014, P. 190

 A Continuum of Accountabilities
 Accountability takes place at different levels
and for different results.
• This figure outlines the accountabilities that
we would typically find in an organization
 Accountabilities move from operational or
input-oriented accountabilities within the
organization to performance and results and
external accountabilities to boards and
legislators.
• All those forms of accountabilities occur
within the agency at one time.
• Every part of this continuum has to work.
• Organizations need operational and financial
information as part of the way they manage.
Note. From Andrew Graham,2014, P. 192
 Let’s practice Accountability:
Accountability Definitions According to each definition, describe According to each definition, describe
your accountability as a student the accountability of a hospital
Accountability is the requirement to Group1 Group 2
explain and accept responsibility for
carrying out an assigned mandate in
light of agreed-upon expectations
Accountability is about evaluating Group 3 Group 4
performance, meeting legitimate
standards, fulfilling legitimate
commitments and holding responsible
those who fail to meet the standards
Some individuals or defined groups are Group 5 Group 6
held responsible for a set of activities
that correspond to their actual span of
control and capacity to act
 Let’s practice Accountability: for what
Accountability categories According to each accountability According to each accountability
category, describe your accountability category, describe the accountability of
as a student a hospital
Performance: Did the organization Group1 Group 2
perform in accordance with its
financial plan? Actual versus budgeted
results.

Forward Impacts: To what extent the Group 3 Group 4

current activities and results have an
effect on future activities and results?
Surplus, deficit, risks

Financial condition: based on accurate Group 5 Group 6

financial reports, reporting on net
assets, cash flow, liabilities. Reporting
on the sustainability of the entity
 Let’s practice Accountability Dynamic
Accountability Dynamic Describe the accountability dynamic Describe the accountability
related to you as a student (the dynamic related to a hospital (the
organization) organization)
1. Assignment of authority, power and resources: downward Group 1 Group 2
delegation of duties to an individual organization through
contracts, budget distribution.
2. Accountability for performance and results: in accepting the Group 3 Group 4
authority, power and resources, the individual or organization
also takes on the responsibility to perform the work and account
for the results.
3. Assignment of Duties: the granting authority provides clear Group 5 Group 6
direction and resources consistent with the expectation
4. Requirement to report: on results achieved, compliance to Group 7 Group 8
legal requirements and efficiency
5. Judgement exercised: the granting authority has the right to Group 9 Group 10
make judgements about how the accountability has been
exercised and act on that judgement
B) Role of Reporting in Accountability
Financial reporting; an important tool for
accountability
Relationship of financial information and
performance data
Internal and External reports
Financial Reporting is an important TOOL of Accountability- how?

They provide information on:

How the organization provided good management of funds
On the results achieved, though in limited ways: financial data tell if the funds
were spent as intended but can NOT tell how effective those expenditures were.
Assurance that the organization has spent the funds within the procedural
requirements
Combined with program results, they can provide information on the efficiency
with which the objectives were achieved
 
Relationship of financial information to other performance data:
Financial information is an indicator of the overall organizational performance. It
can be readily measured and available. However, it seldom tells an organization
how it is performing with respect to its objectives.
 
A fully integrated system of performance measurement would include:
Financial information
Cost performance
Operational performance
Outcomes
Performance Reporting
A successful reporting system for a non-for-profit organization will link the financial results and the
organization objectives.
Reports vary considerably but in general the essential reports can be categorized as:
External Reports:
◦ Financial Statements:
◦ Quarterly Reports
◦ Annual Reports
◦ Performance measurement reports
◦ Audit reports
Internal Reports:
◦ Operational data
◦ Actual to budget reports
◦ Variance analysis
C) Audit and Financial Management
 Definition and objectives
 Types of audit: internal and external
 How to prepare for the audit
 How to interpret the audited financial statements
Audit and Financial Management
Audits are control tools to be used in both assessing performance and holding those accountable
responsible for compliance to both their objectives and the means approved to achieve them

Audit is defined by the Canadian Comprehensive Audit Foundation (CCAF):

“Audit serves an accountability relationship. It is the independent, objective assessment of the
fairness of management’s representations on performance or the assessment of management’s
system and practices, against criteria, reporting to a governing body or others with similar
responsibilities.”
Who is a governing body?
Board of directors, internal management at superior levels, Ministry, funders.
Audit Objectives
 Audits are control tools to be used in both assessing performance and holding those
accountable responsible for compliance to both their objectives and the means approved to
achieve them.
 Audit objectives:
- to make corrections,
- identify trends and
- build trust in the quality of performance reports
 Audit Types
Our focus in this course is on the Financial Audit which involves confirmation of
actual expenditure to planned spending and compliance with accounting
procedures, true representation of costs and full reconciliation of all accounts.

There are two types of Audit:

a) Internal Audit: conducted by the auditors under contract to the organization
b) External Audit: conducted by auditors who report to the authorizing institution
of the organization
 Internal Audit:
Conducted by the auditors under contract to the organization.

The client is the senior management or board of directors of the organization. Auditors are independent of the
activities it audits without any executive responsibilities.

Role:
o Examines adequacy of control systems in the organization (Policies and procedures)
o Examines how funds are spent, recorded and controlled according to the rules provided by the funder
o Ensures adequate measures in place to minimize theft, fraud or misrepresentation
Benefits:
o Gets the organization to think about its risks
o Enhances control for the organization
o Sets up a system for auditing risks suited to its needs
o Gets to the errors before external oversight bodies do
 External Audit:
 Conducted by auditors who report to the authorizing institution of the
organization ex. Ministry of Health
 Similar scope to the internal audit but the person serves a “different master”
It provides an independent and public eye on the soundness of financial
practices and whether the organization is achieving the best value for the
money being spent.
Ensure that money approved by the authorizing body was appropriately used
for the intended purposes
Year- End Procedures
1) Closing the Books
- Accounts Payables to be cleared
- Vacation liability to be calculated (unused vacation time for staff to be translated to $$ and
subtracted from the funds to be returned back to the MOH). Those funds will be paid to staff
should they quit in the next fiscal year
2) Audit: to determine whether the organization spent the funds responsibly
- Auditors appointed by the Board
- Review the books, policies, contracts
- Prepare the Audited Financial Statements
 How to prepare for the audit?
Assemble in one location all:

1- Journals that detail the organization’s business transactions and affected 3. Reconcile all bank accounts
accounts
□ Ledgers for the fiscal year being audited
□ Bank statements and canceled checks 4. Prepare:
□ Payroll records and tax returns showing withholding for employees □ Trial Balance (a report at the end of the accounting period
□ IRS Form 1099s for independent contractors and consultants
that ensures debts equal credits
□ Tax returns (990, 990-T)
□ Invoice and paid bills (receipts) □ Accounts receivable schedule
□ Receipts for credit card transactions □ Accounts payable schedule
□ Depreciation schedules
2. Have organized and readily available all:
□ Expense account analyses requested by your auditor
□ Corporation or organizational documents □ Schedules of prepaid expenses for upcoming fiscal year
□ Policies related to financial management and controls
□ Tax exemption letters □ List of fixed asset additions and dispositions
□ Board or committee meeting minutes □ Investment activities
□ Grant proposals, commitment letters and contracts with funding sources
□ Final reports submitted to funders
□ Contracts with vendors
□ Leases
□ Equipment maintenance agreements
□ Insurance policies (office contents, professional liability,)
How to interpret the audited financial statements
Ottawa Hospital Financial Statement
https://www.ottawahospital.on.ca/en/documents/2019/06/consolidated-financial-st
atements-final-signed-wcag-2018.pdf/
How managers should read the Financial Statements
  Income Statement Cash Flow ** Balance Sheet**

Time Period of time Period of time A point in time

Purpose Profitability Cash movements Financial position

Measures Revenue, expenses, Increases and decreases in Assets, liabilities,

profitability cash shareholders' equity

Starting Point Revenue Net income Cash balance

Ending Point Net income Cash balance Retained earnings

To summarize:
 Every public- sector organization must demonstrate accountability regarding the funds it
received; how funds were spent and what outcomes are achieved.
 Organizations have Internal and External accountabilities to respond to
 Governments must enable the organizations first to be in a position to be accountable
 Financial reporting and performance information are essential for a comprehensive reporting
system
 Internal and External reports are part of the reporting system
 Audit is an essential control mechanism that proves accountability
 Audit can be internal or external
 Organizations prepare for the Audit on annual basis
 W11: RISK MANAGEMENT 
A) What is Risk and Risk management?
o What is risk?
o General approaches to managing risks
o Risk management cycle
o Risk analysis
o Enterprise Risk Management in healthcare
B) The organization’s Control Framework
o Objectives
o Control tools
C) Governance
 Governance meaning and role
 Boards:
o Structure
o Fundamental duties
o Fiduciary responsibility
o Core responsibilities
o Separate roles of board and management
D) Regulatory Compliance
o Statutory compliance in healthcare
o How to comply/obey the law?
Required Preparation
Canadian Public-Sector Financial Management: Second Edition 
Chapter 9: Managerial Control
http://ra.ocls.ca/ra/login.aspx?inst=conestoga&url=https://search.ebscohost.com/login.aspx?
direct=true&db=nlebk&AN=1367766&site=ehost-live&scope=site&ebv=EK&ppid=Page-__-169

Ontario’s health system: Key insights for engaged citizens, professionals, and policymakers.
Hamilton: McMaster Health Forum; 2016: 
◦ Chapter 2: Governance Arrangements:
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Be1cf8FgqLMDblsD67kVRvg?e=3C5cA0