FAC12: Chapter 2 Article

http://news.bbc.co.uk/2/hi/uk_news/wales/wales_politics/8305018.stm

Summary

The performance of International Business Wales (IBW) has recently been criticised and questioned over staff expenses. Earlier in the year, First Minister Rhodri Morgan had firmly denied claims they had made about staff expenses, which later were found to be true. Later two reports were published .The first was an audit of expenses, which has found that some staff expense policies were unclear. The second report was an evaluation of the performance of IBW. The report showed that IBW was underperforming for the last five or more years in US, Asia and parts of Europe. KPMG auditors were sent to investigate expenditure under the order of Dame Gillian Morgan, the assembly government’s permanent secretary. Over 7, 000 transactions were examined by the auditors and they have concluded that a majority of procurement card and other transactions had been conducted properly, but some policies were said to be unclear, particularly for overseas-based staff. A proportion of about 11% of the transactions examined were possibly a breach of policy and a small number were clearly a breach of policy, where appropriate actions would be taken. The 11% of the transaction said to be a possible breach in policy will be followed up and should be concluded by Christmas Eve. People believe that the Government has failed to ensure that taxpayer’s money is spent wisely and effectively and wonder should the IBW continue to exist in its current form.

Connection

The connection between the article, “Assembly Overseas Work Criticised,” and the Financial Accounting Textbook are transaction analysis. Transaction analysis is an important part of accounting and if transactions made by IBW were analyzed properly in the first place, they wouldn’t be in the situation they are now. When a proper transaction analysis was done, auditors from KPMG found out that IBW made many unnecessary transactions. If proper and throughout transaction analysis had been made when IBW did a business transaction, they wouldn’t have been able to use the taxpayers’ money to pay for non-staff expenses. Some of the staff-expenses currently under claim are £553.87 ($969.26 CAD) on school textbooks, £150 (262.50 CAD) on football kits, and £3, 394 ($5, 940.42CAD) on entertaining a client at a ruby international. It was also stated that IBW was underperforming in US, Asia and parts of Europe over the past five years. This underperformance could be connected to the unnecessary transactions made, due to the lenient transaction analysis policies at IBW. If a company has poor transaction analysis policies, then it would surely underperform.

Reflection

I strongly agree with the fact that the government had let down the taxpayers and should change the ways of IBW. IBW shouldn’t be wasting taxpayer’s money on stuff like school textbook and entertainment. I think major changes need to be done to IBW. Although IBW isn’t really a business, I really think they should follow GAAP anyway. One specific principle I think they should follow is the Business Entity Concept; the principle that states that accounting for a business or organization should be kept separate from the personal affairs of the owner, or from any other business. I think this concept is very important, because if this principle was law, then IBW wouldn’t have been able to waste the hard earned money of the tax payers. Having a possible 11% of 7, 000 (781transactoins) transactions that might breach policy is way too much. The greedy higher ups in IBW might not think it is a lot of money, but I don’t think any taxpayers wants to know that the money they are paying goes to school books for wealthy children or entertainment when some family’s are having trouble meeting ends meet. Not only do changes need to be made to the IBW, I believe stricter polices need to be made so this doesn’t happen again, even thought this will probably happen again even with stricter policies.