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Transparency in financial reporting for public sector entities in Sierra Leone

Transparency in financial reporting for public sector entities in Sierra Leone

Transparency is propagated as part of a larger policy goal of good economic governance pursued to achieve poverty reduction.  In Sierra Leone the urge for transparency is part of a set of endeavours aimed at solving the paradox of bountiful natural resources and increasing donor magnanimity, on the one hand, and seemingly intractable dismal poverty, on the other hand. It is also aimed at addressing corruption in public sector entities, among many.

The most important constraint that Sierra Leone faces in applying good transparency practices is the lack of political will and commitment. Without these elements at the core of economic reforms, no amount of foreign assistance or legislation can extricate the country from the dire poverty.

Against this background of heightened realization for economic development, the fight against poverty can effectively be enhanced under an environment of good governance.  Transparency is one of the key instruments for achieving good governance.

Public sector accounts are usually pretty boring, mainly because they focus on compliances presented in a form designed to discourage all but the most determined stakeholders.  Whether driven by technology, fiscal uncertainties or financial mischief, demand by donors and the general public has prominently increased for greater transparency and accountability for public sector entities.  This demand applies to provincial and local administrations (such as, city councils and chieftaincies), corporations, commissions and boards.

This article will seek to give conceptual frameworks on how to make sure the financial reporting for public sector entities provide stakeholders with the information that is clear, timely relevant and usable.

The first concept is to identify the role, authority and objective of what the financial statement will do for the stakeholders.  The role is to help develop and establish authoritative requirements for the reporting system that is to be adopted.  While the financial statements remain the core of reporting they should be comprehensive, since they can report past and present financial and non-financial data, that is, quantitative, information regarding the achievement of financial and service objectives, as well as projected future service delivery and resource needs.  They should also report performance and cash flows, compliance with budget, service delivery achievements and prospective financial and non-financial information.  The financial statements should also provide for decision-making scenarios to the stakeholders who are unable to comprehend financial reports tailored to meet their specific information needs.

The financial reporting should be defined that primary users or their representatives be able to assess whether:

  • The entity has used resources economically, efficiently, effectively and as intended, and whether such use is in the interest of the public;
  • Its cost of services are appropriate;
  • Resource flows are sufficient to maintain the current volume and quality of service.

While the government or donors need information to assess whether:

  • The entity is achieving the objectives desired;
  • Operations are funded with monies raised from the activities of the entity;
  • Additional resources will be needed in the future, and how those resources will be obtained.

The qualitative characteristics of this information are the usual faithful representation, understandability, timeliness, comparability and verifiability, constrained by materiality and cost-benefit considerations.

The second concept describes the element and recognition in the financial statements, which identifies alternate asset and liability-led and revenue and expense-led approaches to financial statements, and considers the key characteristics of assets, liabilities, revenue and expenses.  This concept considers two approaches for reporting public sector entity financial performance.  The first measures performance as the net result of all changes in the entity’s economic resources and obligations during the fiscal period.  This is the asset-liability led approach.  The other approach measures financial performance as the result of revenue inflows and expense outflows more closely associated with operations in the fiscal period.  This is the revenue-and-expense led approach.  These different approaches will result in different definitions and yield different reporting results.

One of the most critical issues is how revenue and expenses should be associated with the reporting period.  Under the asset-liability led approach, the focus should be on items that represent changes in net resources between the reporting dates.   The revenue-and-expense led approach should focuses on the cost of services attributed to the period, thus requiring that revenues be attributed to finance the related costs.  This holds the entity accountable for the raising of revenue and its use of that revenue.

The third concept entails measurement of assets and liabilities in the financial statements.   It considers the measurement bases appropriate for particular elements recognized in the financial statements.   This involves historical cost, market value and replacement cost.  Most accounting gurus are familiar with historical cost and its many qualitative advantages.  The downside is that it may not be relevant to future resource needs, and is not always comparable.

Entry values represent the consideration paid for an asset or assumed for a liability, while exit value looks to the amount that will be derived from an asset, either through its sale or its service potential.  Entity-specific values are based on economic constraints and opportunities rather than intentions and expectations, and can be seen as more relevant than market values, which tend to depend on a deep and liquid market to satisfy the qualitative characteristics of financial information.  This however, may pose a problem for valuing specialized assets, which are commonly used in public entities.  In this regard, one can consider that replacement costs are highly relevant as they reflect the economic position of the entity and permits cost of services to be reported in current-cost terms.  The downside is that replacement costs can be complex and costly, in terms of diminishing timeliness, comparability and verifiability.

This concept will produce bases that are current, entity-specific and close to market where appropriate.  It will be highly relevant but may not incorporate the other qualitative characteristics of financial reporting.

The fourth conceptual framework I will discuss in this article is the key characteristics of the public entity with potential implications for financial reporting. In this concept, I will start with the objectives, being that the private sector is profit-driven while the public sector delivers goods and services.  Delivering goods and services characterizes government by its breadth of powers (compared to the private sector), including the ability to establish and enforce legal requirements and a high volume of non-exchange transactions.

We can say that most public sector entities in Sierra Leone are evaluated by their financial position and performance, as it is in the global economy.  Since public sector entities are primarily wealth accumulators and distributors, their financial position and performance measurement can be define by different set of questions than one might ask to the private sector.

  • Has the entity provided its services in an efficient and effective manner?
  • How did the entity finance its activities and meet its cash requirements?
  • Did the entity’s ability to provide for services improve or deteriorate compared to last year?
  • What resources are currently available for future expenditures, and to what extent are resources reserved or restricted for specified users?

Also on this issue is the distinction the budget poses.  The budgets of public sector entities are widely distributed and discussed but that of the private sector are rarely publicized because they hold the key to the entity’s strategy and direction.  Public sector budgets are critical since they are the key by which legislatures exercise oversight of the executive, and the electorate holds elected representative accountable.  Comparison of actuals to budgets is a key measure of accountability, and of interest to users, thus impacting the scope of financial reporting.

When we think about entities holding assets in the form of tangible equipment, such as, buildings, caterpillars or buses, it should be noted that the private sector hold these to generate cash flow that contribute to profits, while the public sector hold such assets to deliver services.  Moreover, a high proportion the assets in the public sector are specialized in nature and are not readily saleable, which has implications for measurement.  Ironically, this may lead to further discussion regarding the going-concern concept in accounting standards, which should be noted in public sector entity reporting.  It will enhance accountability and decision-making.

The present generation in Sierra Leone yearns for performance, accountability and transparency.  Why is this so?  Sierra Leoneans need transparency in order to hold government accountable for the use of revenues.  By being transparent, government will bolster relation with the public.  We can argue that financial reporting is the ultimate goal of an entity, to show its stakeholders the strength and weakness of its existence.  But why the concern?

Perhaps it is the mistrust of reported information by some public sector entities that ignites investigation by the Board of Directors.  The Board of Directors must be held responsible for the dysfunctional activities of the public sector entity it is mandated to control.  To avoid such occurrences, transparency is propagated as a fundamental first step to lifting the curse that will permeate the performance of that entity.

If transparency in public sector entities is to achieve its aims, it needs proper socio-political, legislative and economic settings.  Furthermore, it must be understood clearly that it is a means not an end. In its proper context, transparency in these entities is a prerequisite for effective participation by the legislature and civil society; and it encourages better decision-making by the government and provides a check on the behaviour of executives that run them.

In the final analysis, transparency should enable citizens to exercise oversight functions

over their national resources and how these are spent to meet their needs in an equitable manner.

On the basis of the above analysis, it would appear that some of the transparency

deficiencies could be solved relatively easily and within a short period of time, while others are structural in nature, requiring enormous resources to implement changes. In this regard, here are outlines of some general short and long-term recommendations that could be used.


  • Expedite the enactment of, and strengthen existing laws to ensure clear rules of responsibility.
  • Improve public access to financial information of public sector entities. In the interest of credibility, government should be committed to publishing financial information of public sector entities.
  • Ensure integrity by appointing an independent aggregator, to help meet compliance objectives and to constitute an important step in establishing an independent audit capacity.


  • Improve the quality of data for publication.
  • Promote training in financial methodologies, ensure that staff resources are available to undertake improvements and developmental work
  • Emphasize automation in the compilation, while introducing computerization of the accounting and budget system.
  • Strengthen the offices of the Auditor General and Parliamentary Committees.

I am pretty certain that sufficient laws and regulations are in place to ensure financial transparency in public sector entities operating in Sierra Leone.  A number of them suffer at the implementation stage of these laws.  Non-implementation of sound laws reflects lingering capacity constraints in the form of skilled personnel, and of materials, such as, computers and financial resources. Moreover, the unpredictability of donor aid flows is a factor strongly influenced by economic developments and the frequently changing political priorities of the donor nations. Notwithstanding these constraints, political will and leadership commitment to sound economic governance will ultimately determine the pace, depth and breadth of transparency. No amount of foreign assistance will succeed in reducing poverty without leadership commitment at the core of sound economic reform and economic management.

Public sector entities should restore the public’s faith in the financial information they disseminate.  So they should put as much information out as fast as possible, and make it easily accessible, searchable and resounding.  Let us not talk about transparency, lets us be transparent for the good of future generations in Sierra Leone.

By Emmanuel S. E. Leigh.

About the Author

Emmanuel S. E. Leigh was a senior civil servant in the Sierra Leone Civil Service, and is the author of a book entitled ‘The Sierra Leone Financial System’ published by Author House, 2004.  Emmanuel lives in the diaspora and actively follows the trends and activities in Sierra Leone.

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  • I have followed up with the comments of Mr. Cyprian Kamaray. This article is not an exert from my book. The article is purely about public sector entities. It should be noted that throughout the article nothing has been mentioned about the central government accounting system or reporting. I know that in the government accounting system an annual publication is produced depicting the operations of government.
    Please note that the article was not written as a witch hunt, it was an expression of my personal views.

    10th November 2011
  • I have just read the article entitled below:

    Transparency in financial reporting for public sector entities in Sierra Leone

    I am not sure whether this was an extract from the book of the author (published in 2004) or it is based on the present. However, the article presented only theoretical analysis of public sector financial reporting (in the light of transparency)and was not related to the present situation in Sierra Leone. It says at the end that the author actively follows the trends and activities in Sierra Leone but I am not sure whether he follows actively financial reporting in the public sector in Sierra Leone or else he would have commented on the remarkable improvement in that area, especially with regard to the Annual Public Accounts of the Central Government, which I can boastfully say that I stimulated as a former Accountant General. The Annual Public Accounts of the Central Government are now timely (available in the Government Bookshop by the end of March the following year) and are very much transparent along with budget comparisons. Report of the Accountant General explaining the Financial Statements is also presented. Furthermore, they are comparable with those of other Governments in Africa. Major challenges now include the need to improve on its comprehensiveness (for eg. bringing in project funds) and to consolidate with those of Local Councils (which are also produced timely though there is need to improve on their quality) and other subvented agencies or budget entities.

    9th November 2011

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