Public Sector Financial ReportingOkay, public sector financial reporting sucks, BIG TIME!! Not only do I totally not get this topic, but I also dislike the lecturer (no hard feelings or anything, though). I also HATE the fact that while this topic will make up about 36% of the final exam, there are no relevant readings on it in the textbook (which is partly a good thing, because I won't have to read a whole bunch of crap about it, ha!)
Oh well, now let me try to revise what I've learned about the public sector financial reporting (uuurrgghh..!!)
Alright then, for a start, here's how the
accountability in the NZ government works:
There are Voters and Taxpayers (they act as the Shareholders if compared to a company)
Then the Parliament (similar to the Board of Directors)
Then the Government/Cabinet (similar to the Managers)
Then the Departments, SOEs, and Crown Entities (similar to.. the various departments in a company, I guess..? )
The Central Government consists of the Parliament, SOEs, Ministers, Crown entities, departments, bla bla bla..
The Local Government consists of regional and city councils (oh, and not to forget the district councils!)
Now, what's the
importance of the public sector in NZ?
Well, they obviously have an impact on the economy and social well-being. They also provide essential services such as education, health, defence, transportation, water supply, etc.
Oh yeah, the public sector also has different purposes, such as maximising national welfare through not-for-profit and for-profit entities (also known as State Owned Enterprises - SOEs).
The government has coercive power, and what's that?? Hell, it's the power to force you to do things (such as imposing a death sentence to innocent 5-year olds, naaah the NZ government's not that vicious!) It has the power to tax, legislate, create rights and obligations. But there needs to be control on this power! Like I said, the government can't just impose a death sentence to kids! Oh no, wait, I don't think death-sentencing is applicable in this peaceful nation of New Zealand.. hmm..
Do special features of the public sector financial reporting result in a different accounting from the private sector?? Well, there
are some differences, but actually the private and public entity reporting are soooo similar. The differences are in the case of
power (increased reporting to constrain power),
purpose (public benefit entities must report on services, not profit!), and
unusual assets (such as heritage assets and infrastructure assets). The FRSs require these sorts of assets to be presented in the financial statements, but there are still some controversies about it. Like.. should heritage assets be depreciated? Etc.
Departments and Crown Entities should have a Statement of Unappropriated Expenditre, Statement of Actual against Projected Expenditure, Statement of Service Performance, and Statement of Intent (similar to budget statements).
GAAP for service performance:Statements of Service Performance
must show outputs, and
may disclose outcomes. They must also present both the
projected and
actual service performance.
Outputs:Outputs are the final goods and services provided by public benefit entities. For examples: education policies, clean water supply, highly-infrastructured motorways. The key measures of output in order to comply with GAAP are
quality, quantity, and
cost. Other relevant and appropriate measures are time and location. The output must also be specified and described in the reports.
Inputs:Inputs are the resources used to create outputs. For examples: labour, stationery, electricity, materials, and other expenses.
Outcomes:Outcomes are the impacts on or consequences for the community as a result of creating the outputs. For examples: well-educated children, lower crime rates, and healthier community.
Outcomes are more significant than outputs, because:
- Outcomes are harder to control, measure and predict
- They are difficult to budget
- The public benefit entities cannot be held accountable for them
- They are usually reliant on more than one groups, for example a safer community relies heavily on the police, the support from the community itself, courts, etc.
