QUESTION TWO Below is the complete set of Financial Statements of Take-Home University (THU), a Public University of Ghana, issued on 1st May 2020. Statement of Financial Performance for the Year Ended 31 December, 2018 Revenue Notes GOG grant 1,540,000,000 Internally Generated Funds 2 14,427,492,000 Donations and other income 9,278,258,000 25,245,750,000 Expenditure Compensation for employees 3 8,385,270,000 Goods and services 4 2,238,083,000 Social benefit 1,720,000 Interest 1,720,000 Capital expenditure (CAPEX) 5 25,542,515,000 Other expenses 6 79,100,000 36,248,408,000 Net Operating Result Deficit (11,002,658,000) Statement of Financial Position as at 31 December 2018 Notes Current Assets Cash and cash equivalent 294,233,000 Receivable (468,050 -10,000) 458,050,000 Inventory 155,254,000 907,537,000 Liabilities and Fund Payable 7 696,325,000 20% Loan 8,600,000 704,925,000 Accumulated fund 8 202,612,000 907,537,000 Cash Flow Statement for the Year ended 31st December 2018 Cash Inflows GOG grant 1,540,000,000 Internally Generated Funds 14,427,492,000 Donations and other income 9,278,258,000 25,245,750,000 Cash Outflows Compensation of employees 6,385,270,000 Goods and services 1,989,112,000 Social benefit 1,720,000 Interest 1,720,000 Capital expenditure (CAPEX) 15,542,500,000 Other expenses 79,100,000 23,999,422,000 Increase in Cash and Cash Equivalent 1,246,328,000 Cash and Cash Equivalent as 1/1/18 -952,095,000 Cash and Cash Equivalent as 31/12/18 294,233,000 NOTES TO THE FINANCIAL STATEMENTS Accounting policy a) Basis of accounting The financial statements are prepared on accrual basis of accounting. b) Inventory valuation Inventory is valued at lower of cost and net realisable value. c) IPSAS The financial statements are prepared in compliance with the IPSAS and all relevant financial legislations. Internally Generated Fund Fees income 4,575,622,000 Consultancy fees 655,600,000 Admission forms 9,196,270,000 14,427,492,000 1. Employees Compensation Allowance 856,670,000 Establish post 5,312,430,000 Non establish post 1,253,600,000 Books and Research allowance 150,765,000 Project work allowance 48,500,000 Superannuation 278,500,000 End of service benefits 298,040,000 Books and Research allowance arrears 186,765,000 8,385,270,000 Use of Goods and Services Legal cost 25,059,000 Consultancy cost 800,000,000 Seminar cost 500,000,000 Training and Workshop Cost 104,000,000 Utilities 560,053,000 Increase in Provision for doubtful debt 5,060,000 Opening inventory 399,165,000 Closing inventory (155,254,000) 2,238,083,000 Capital expenditure Property, plant and equipment 17,292,500,000 Work in Progress 8,250,015,000 25,542,515,000 Other expenses Trial balance 71,000,000 Sponsorship 8,100,000 79,100,000 Payables Payables 182,840,000 Consultancy cost 234,500,000 Book & Research All. 186,765,000 Interest payable 1,720,000 Tax withholding 90,500,000 696,325,000 3. Accumulated Fund Balance at start 11,205,270,000 Net operating result (11,002,658,000) 202, 612,000 Required: a) Using the Qualitative Characteristics (QCs) of General-Purpose Financial Report as a Framework, evaluate the information usefulness of the set of financial statements presented by the THU. (10 marks) b) Based on the relevant IPSASs, explain the significant observations you have made about the financial statements of THU and suggest improvement, if any.