Drafting financial statements - Public sector

Questions which are set in section one to this paper aim to test the candidates ability to perform the functions of an accounting technician in one of the three main branches of the public sector – central government, the health service and local government. This is while still retaining knowledge of private sector accounting techniques through the elements of paper C1 in section two. The logic of this approach is that increasingly public sector financial reporting reflects private sector accounting practices. At the same time, however, it retains its own distinct flavour and special features. Candidates are obviously aware that the choice of sector is theirs but is normally dictated by that within which they work.

As with any professional examination paper the best revision is the study of questions that have already been set in previous examination papers. There are limited texts that cover the subject matter of the syllabus available but, Coombs and Jenkins Public Sector Financial Management and Jones and Pendlebury Public Sector Accounting, taken together, give the context of the public sector accounting elements of the syllabus. All primary areas of the syllabus have, however, now been examined. The bank of questions available through past papers and suggested solutions cover the majority (if not all) of the techniques that an accounting technician would need to know to successfully pass the public sector accounting elements of the syllabus in the sector of her/his choice.

It is not unknown for candidates for professional examinations to attempt to guess the questions likely to come up. In the case of public sector accounting, study of the syllabus will reveal that the range of questions that can be asked in each of the sector specific areas is not large. When you enter the examination room therefore there are key areas that you must understand in order to increase your chances of high marks on the public sector accounting questions you attempt.

Specific core areas are:

• Local government – revenue account and consolidated balance sheet together with associated journal entries and pension funds;
• Health service – endowment funds and the accounts of NHS trusts (together with associated journal entries); and
• Central government – supply accounts and resource accounting including associated journal entries.

It should not be forgotten that the notes that inevitably underpin these technical aspects in questions require the need for accrual adjustments. These skills should be ‘bread and butter’ to any accounting technician but some candidates in the past have failed to adequately deal with these types of adjustments.

As well as the sector specific topics outlined above a common theme emerging across all three sectors and reflected in the syllabus is performance measurement. This area has been given particular emphasis by the new buzz phrase ‘best value’. A number of unit cost type questions have already been set in the NHS and central government. Students from all three sectors should pay attention to this area. It is also suggested that by the analysis of themed areas in past questions students can build an ‘aide memoire’ of issues which address common problems in these scenarios. By this I mean if you are attempting to answer a question which let us say deals with a comparative unit cost exercise on food costs where a meal in one staff restaurant is more expensive than another then quantitative and qualitative factors come into play in your analysis. Possible explanations of such variations could include fraud, quality of food, size of meals, different suppliers, waste etc. Successful analysis of this type together with associated solutions to improve matters would help students gain useful extra marks. Study of these factors in answers to past questions would enable you to be better prepared to answer other performance measurement questions in a different scenario. Effectively by this method candidates take into the examination room a tool kit to tackle any variation on this type of question. Marks are also normally available for answering questions in the format requested – frequently a report. Don’t therefore throw presentation marks away by ignoring simple instructions.

It is also important for students to recognise that in compiling their answer to a question it is possible to make mistakes. All questions in the public sector element of the paper require comment. The objective of this is to encourage students to develop analytical and critical skills that are becoming more and more relevant to opening up career paths for accounting technicians. You should, however, concentrate your analysis on the results you have obtained and not worry about whether the answer is one hundred percent correct. You might have lost some marks in the technical section of the question but sound analysis of your results will help gain marks in the discussion/critique section. Try to adopt a motto of ‘don’t panic’ and concentrate on enhancing what you have been able to achieve.

Past experience of marking papers have shown that numerous candidates appear not to manage their time in the examination room particularly well. A number of candidates have, for example, failed to tackle adequately the C1 elements of the paper having seemingly devoted all their time to the public sector question. This is obviously a poor use of resource and, as such, candidates should remember it is easier to pick up marks by attempting a new question rather than constantly refining the question they are currently attempting.

Study of the model answers will also reveal that marks are effectively available in blocks for dealing with each element of the question. By this I mean a maximum of say three marks may be available for a particular note to the question. If you get stuck on one specific particular point, it is worth considering how many marks are likely to be available for this note, and then moving on to something you can do. By this way you are able to build marks across the whole paper and not get bogged down, thereby completing as much of the paper as possible. At the end of the day the objective is to pass and it is worth remembering that ‘marks mean prizes’, in this case the prize being success. It is not to seek perfection in your answer, but to demonstrate to the examiner that you have sufficient skills across the whole range of the paper so that the examiner can feel confident you are worthy of a pass.

Finally I hope you have found these comments useful and constructive and I wish you every success in the examination.

Bibliography
Coombs H.M and Jenkins, D.E. (in press), Public Sector Financial Accounting, 3rd edition, Thompson International Publishing.
Jones R. and Pendlebury M., (2000), Public Sector Accounting, 5th edition, Prentice Hall.

Professor Hugh Coombs is the Examiner for paper C1A Drafting Financial Statements – Public Sector.