Historical overview of

Ethiopian Government
Accounting System
The Federal Government of
Ethiopia accounting system
used up to GC 2002 was in
service
For more than half a
century. Government
decided that there was
a need to reform the
accounting processes as an
integral part of the Civil
Service Reform to achieve
the following
1
set of objectives:
 Simplify the accounting
system by changing it from
the single entry bookkeeping
system to the double entry
bookkeeping system,
 Improve disclosure of
information to stakeholders
by revising the chart of
accounts
and enhancing the reports
generated by the system to
meet the information needs
of

2
Government and its
development partners.
 Expand the current
accounting system by
changing the basis of
accounting from
cash basis to a modified
cash basis of accounting
to include the recording
and
reporting of select current
assets and current liabilities.
 Improve internal controls
by reviewing the roles and

3
responsibilities of staff
working
in the accounts
department and
introducing enhanced
procedures to capture
and
approve transactions as well
manage and control cash in
safe and cash at bank.
 Improve cash and
financial management
practices by rationalizing the
number of

4
bank accounts and
minimizing the amount of idle
funds.
 Improve budget control
by introducing procedures
to record and monitor
commitments (Amount of
budgeted funds that are
reserved for a specific
future
expenditure) against the
available budget prior to the
approving expenditure.

5
 Produce accurate, timely
and complete information
and improve the quality of
information provided to
Government and its
development partners to
create a platform
that allows for better decision
making based on timely,
accurate and comprehensive
information.
 Enhance transparency
by implementing a
system that is
understandable to key
6
stakeholders and meets
international standards in
terms of the accounting
principles and
policies employed and the
automation of the accounting
system.
Contents
Historical overview of Ethiopian Government Accounting System....................................................3
Federal Government Financial Management Structure.......................................................................3
FGE Chart of accounts.............................................................................................................................4
Overview of IBEX and IFMIS..................................................................................................................5
Basis of accounting..................................................................................................................................6
Legal Framework of FGE Financial Administration..............................................................................7
Monthly Reports with practical example................................................................................................7
Annual Financial statements with practical example...........................................................................9
Federal Audit report................................................................................................................................10
Characteristics of Non-governmental NFP organizations.................................................................11
Charities and societies law in Ethiopia.................................................................................................11
Financial reporting and accounting for NGOs.....................................................................................12
Reference................................................................................................................................................14

7
Introduction
Accounting is mainly governed by conventional concepts and principles. These conceptual
backgrounds are very important to study the structure and operations in accounting system. As
information processing system of an organization accounting is affected by various factors such
as its environment and characteristics. This is what is to be explained in the first unit of this
course.
Accounting provides critical information for good financial administration system of
organizations. Government money is a public resource which the government has to spend as
per clear directives and procedures. The accounting system has to control this resource through
a budget control. Thus, this course also deals with financial administration in FGE accounting
system in the assumed administrative structure and the roles and responsibilities of different
units of the government. The course also describes procedures in accounting for transaction
and budget control in FGE accounting system. It focuses on accounting for daily economic
activities and budget control that is the broad goal of the FGE accounting system and hence
employs mechanisms for budget control.
The overall objective of this course is therefore to capacitate students on understanding basic
concepts and principles of FGE accounting and reporting system, budget preparation financial
reporting and control mechanisms. In general, you are expected to apply appropriate accounting
and financial treatments capture government activities with financial effect as occurred, prepare
financial reports and ensuring control and transparency in using public financial resources,
under the statutory framework and applicable accounting principles.

8
Historical overview of Ethiopian Government Accounting System
The Federal Government of Ethiopia accounting system used up to GC 2002 was in service for
more than half a century. Government decided that there was a need to reform
the accounting processes as an integral part of the Civil Service Reform to achieve the following
set of objectives:Simplify the accounting system by changing it from the single entry book
keeping system to the double entry bookkeeping system, Improve disclosure of information to
stakeholders by revising the chart of accounts and enhancing the reports generated by the
system to meet the information needs of Government and its development partners. Expand
the current accounting system by changing the basis of accounting from cash basis to a
modified cash basis of accounting to include the recording and reporting of select
current assets and current liabilities. Improve internal controls by reviewing the roles and
responsibilities of staff working in the accounts department and introducing enhanced
procedures to capture and approve transactions as well manage and control cash in safe
and cash at bank. Improve cash and financial management practices by rationalizing the
number of bank accounts and minimizing the amount of idle funds. Improve budget control
by introducing procedures to record and monitor commitments (Amount of budgeted
funds that are reserved for a specific future expenditure) against the available budget
prior to the approving expenditure. Produce accurate, timely and complete information and
improve the quality of information provided to Government and its development partners to
create a plat formthat allows for better decision making based on timely, accurate and
comprehensive information. Enhance transparency by implementing a system that is
understandable to keystake holders and meets international standards in terms of the
accounting principles and policies employed and the automation of the accounting system.

Federal Government Financial Management Structure

The federal government's financial management structure typically consists of several key
components:
1. Treasury Department: The Treasury Department is responsible for overseeing the overall
financial management of the government. It is typically headed by a Secretary of the Treasury
or a similar position. The department's main functions include managing the government's cash
flow, issuing and servicing government debt, and coordinating financial policy.
2. Budget Office: The Budget Office, also known as the Office of Management and Budget
(OMB), is responsible for preparing and implementing the federal government's budget. It works
closely with various departments and agencies to develop the budget proposal, review and
analyze spending requests, and ensure compliance with financial regulations.
3. Accounting and Reporting: The federal government maintains a comprehensive accounting
and reporting system to track its financial transactions and prepare financial statements. This is
typically overseen by the Department of the Treasury, which establishes financial accounting
standards and policies for federal agencies to follow.
4. Federal Agencies: Each federal agency has its own financial management structure, which
includes a Chief Financial Officer (CFO) and related staff. The CFO is responsible for managing

9
the agency's financial operations, budgeting, financial reporting, and ensuring compliance with
financial regulations.
5. Internal Controls: Internal controls are policies and procedures designed to safeguard the
government's assets, prevent fraud and mismanagement, and ensure the accuracy and
reliability of financial reporting. Federal agencies are required to establish and maintain effective
internal controls to mitigate financial risks.
6. Auditing: The federal government's financial management is subject to external audits
conducted by the Government Accountability Office (GAO) and other independent audit
organizations. These audits assess the government's financial statements, internal controls, and
compliance with laws and regulations.
It's important to note that the specific structure and organization of the federal government's
financial management may vary depending on the country and its governance system.

FGE Chart of accounts

The Federal Government's Chart of Accounts (CoA) is a standardized framework used to
classify and categorize financial transactions and accounts within the government. It provides a
uniform structure for recording and reporting financial information across federal agencies.
While the specific details of the CoA may vary by country, here is a general example of the
components that can be included:
1. Asset Accounts: These accounts represent the government's resources and include
categories such as cash, investments, property, and equipment.
2. Liability Accounts: These accounts capture the government's obligations or debts. Examples
include accounts payable, loans, and other liabilities.
3. Revenue Accounts: These accounts record the inflow of funds to the government, such as
taxes, fees, fines, and grants.
4. Expense Accounts: These accounts track the government's expenditures, including
categories such as salaries, supplies, utilities, contracts, and program expenses.
5. Equity Accounts: Equity accounts represent the government's net assets or the difference
between its assets and liabilities. They may include items like retained earnings or reserves.
6. Fund Accounts: The Chart of Accounts may also include fund-specific accounts to track
financial activities for specific purposes or projects. Examples include general funds, special
revenue funds, trust funds, and capital project funds.
7. Cost Centers or Program Codes: These codes allow for additional tracking and reporting of
expenses related to specific programs, departments, or projects within the government.
8. Interagency and Intragovernmental Accounts: These accounts capture transactions between
different federal agencies or within the same agency.
9. Budgetary Accounts: These accounts help track the budgetary process, including
appropriations, allocations, and encumbrances.

10
It's important to note that the specific structure and numbering system of the Chart of Accounts
can vary across different federal governments. The purpose of the CoA is to provide
consistency and standardization in financial reporting and analysis across the government.

Overview of IBEX and IFMIS

IBEX (Integrated Budget Execution and Accounting System) and IFMIS (Integrated Financial
Management Information System) are two key systems used in financial management within
government organizations. Here's an overview of each system:
1. IBEX:
IBEX is an integrated software solution designed to streamline and automate budget execution
and accounting processes. It helps government entities manage their financial activities more
efficiently and transparently. IBEX typically includes the following functionalities:
- Budget Planning and Execution: IBEX facilitates the preparation, review, and execution of
budgets. It helps in budget formulation, tracking expenditures against budget allocations, and
generating budget execution reports.
- Accounting and Financial Reporting: IBEX enables accurate and timely recording of financial
transactions, maintains a general ledger, and generates financial reports such as balance
sheets, income statements, and cash flow statements.
- Cash Management: IBEX assists in managing cash flows, including cash receipts,
disbursements, and reconciliations. It helps monitor and control cash balances to ensure
effective cash management.
- Procurement and Contract Management: IBEX may include features to manage procurement
processes, vendor databases, purchase orders, and contract management. It helps streamline
procurement activities and ensures compliance with regulations.
- Asset Management: Some versions of IBEX include asset management capabilities, allowing
organizations to track and manage their fixed assets, depreciation, and inventory.
2. IFMIS:
IFMIS is an integrated financial management information system that provides comprehensive
financial management functionalities for government entities. It aims to improve transparency,
accountability, and efficiency in financial operations. Key features of IFMIS include:
- Budget Preparation and Execution: IFMIS facilitates the budgeting process, including the
formulation, review, and execution of budgets. It helps automate budget workflows and provides
real-time monitoring of budget execution.
- Accounting and Financial Reporting: IFMIS enables accurate and standardized recording of
financial transactions, maintains a central general ledger, and generates financial reports for
decision-making and compliance purposes.
- Procurement and Contract Management: IFMIS streamlines procurement processes, from
requisition to payment. It helps manage vendor databases, purchase orders, contracts, and
supports procurement planning and monitoring.

11
- Cash and Treasury Management: IFMIS assists in cash management by providing tools for
cash flow forecasting, cash positioning, and reconciliation of bank accounts. It helps optimize
cash utilization and minimizes idle funds.
- Debt and Liability Management: Some IFMIS systems include modules for managing
government debt, loans, and liabilities. It helps track debt obligations, interest payments, and
ensures compliance with debt management policies.
Both IBEX and IFMIS play crucial roles in enhancing financial management within government
organizations. They promote transparency, accountability, and efficiency by integrating
budgeting, accounting, procurement, and other financial processes into a unified system. Their
implementation can lead to improved financial reporting, better decision-making, and effective
utilization of resources.

Basis of accounting
The basis of accounting refers to the set of rules and principles that determine how financial
transactions and events are recorded, recognized, and reported in an organization's financial
statements. There are two main bases of accounting:
1. Cash Basis Accounting: Under cash basis accounting, transactions are recorded when cash
is received or paid. Revenue is recognized when cash is received, and expenses are
recognized when cash is paid out. This method does not consider accounts receivable or
accounts payable. Cash basis accounting is relatively simple and straightforward but may not
provide an accurate picture of an organization's financial position and performance, especially
for larger entities.
2. Accrual Basis Accounting: Accrual basis accounting is the more widely used method in
business and government organizations. It recognizes revenue when it is earned, regardless of
when cash is received, and records expenses when they are incurred, irrespective of when cash
is paid. It considers accounts receivable and accounts payable, reflecting the organization's
financial obligations and future cash flows. Accrual basis accounting provides a more
comprehensive view of an organization's financial position and performance, enabling better
decision-making and financial analysis.
In addition to these two primary bases of accounting, there are other specialized bases that may
be used in specific situations:
3. Modified Cash Basis Accounting: This approach combines elements of both cash basis and
accrual basis accounting. It uses cash basis accounting for certain transactions and accrual
basis accounting for others, depending on specific criteria.
4. Regulatory Basis Accounting: Certain industries or sectors may have specific accounting
principles and rules set by regulatory bodies. For example, insurance companies may follow the
statutory accounting principles (SAP) mandated by insurance regulatory authorities.
It's important for organizations to choose the appropriate basis of accounting based on their
size, nature of operations, regulatory requirements, and financial reporting needs. Generally,
larger and more complex organizations tend to use accrual basis accounting due to its ability to
provide a more accurate representation of financial performance and position.

12
Legal Framework of FGE Financial Administration
The legal framework of FGE (Federal Government Entity) financial administration is governed
by various laws, regulations, and guidelines. These include:
1. Constitution: The constitution of the country provides the overall framework for financial
administration, including the allocation of powers and responsibilities between different levels of
government.
2. Financial Administration Laws: These laws establish the legal basis for financial
administration at the federal level. They outline the roles and responsibilities of various entities
involved in financial management, such as the Ministry of Finance or Treasury Department.
3. Budget Laws: Budget laws define the process for preparing, approving, and executing the
federal budget. They outline the rules and procedures for allocating resources to different
government programs and activities.
4. Public Procurement Laws: These laws regulate public procurement processes, ensuring
transparency, fairness, and efficiency in government procurement activities. They establish
rules for tendering, bidding, contract awarding, and dispute resolution.
5. Accounting Standards: Accounting standards provide guidelines for recording financial
transactions and preparing financial statements in accordance with generally accepted
accounting principles (GAAP). These standards ensure consistency and transparency in
financial reporting.
6. Audit Laws: Audit laws establish the framework for conducting internal and external audits of
government entities' financial operations. They define the roles and responsibilities of auditors,
audit committees, and oversight bodies.
7. Anti-Corruption Laws: Anti-corruption laws aim to prevent corruption in public administration
by establishing rules on bribery, embezzlement, fraud, conflict of interest, and other corrupt
practices. These laws provide a legal basis for investigating and prosecuting corruption cases.
8. Financial Regulations: Financial regulations provide detailed guidance on specific aspects of
financial management such as budget execution, cash management, debt management,
revenue collection, expenditure control, asset management, etc.
9. International Standards: In some cases, international standards such as International Public
Sector Accounting Standards (IPSAS) or International Financial Reporting Standards (IFRS)
may also apply to the financial administration of FGEs, especially if the country has adopted
these standards.
It is important for FGEs to comply with these legal frameworks to ensure transparency,
accountability, and effective financial management. Failure to comply with these laws can result
in legal consequences such as fines, penalties, or even criminal charges.

Monthly Reports with practical example

Monthly reports are a crucial tool for businesses to track and analyze their performance, identify
trends, and make informed decisions. They provide a snapshot of key metrics and progress

13
towards goals on a monthly basis. Here is a practical example of a monthly report for a fictional
e-commerce company:
1. Executive Summary:
- Overview of the company's performance during the month.
- Highlights of key achievements, challenges, and opportunities.
- Summary of financial performance.
2. Sales Performance:
- Total sales revenue for the month.
- Comparison with previous months or the same period last year.
- Breakdown of sales by product category or customer segment.
- Analysis of top-selling products or best-performing regions.
3. Marketing Activities:
- Summary of marketing campaigns executed during the month.
- Key metrics such as website traffic, conversion rates, and cost per acquisition (CPA).
- Evaluation of the effectiveness of different marketing channels (e.g., social media, email
marketing).
4. Customer Insights:
- Number of new customers acquired during the month.
- Customer retention rate and churn rate.
- Feedback received from customers through surveys or reviews.
- Identification of customer preferences or emerging trends.
5. Inventory Management:
- Inventory turnover ratio to assess how quickly products are sold.
- Stock levels at the beginning and end of the month.
- Analysis of slow-moving or obsolete inventory.
6. Financial Performance:
- Profit and loss statement for the month.
- Comparison with budgeted figures or previous months/years.
- Gross margin analysis to evaluate profitability
7. Operational Efficiency:
- Key operational metrics like order fulfillment time, customer support response time, etc.

14
 - Identification of bottlenecks or areas for improvement in operations.
8. Recommendations and Action Plan:
Based on the analysis conducted in the report, provide recommendations for improvement in
various areas such as marketing, sales, customer service, and operations. Outline an action
plan for the upcoming month to address the identified opportunities or challenges.
Remember, the specific content and structure of a monthly report may vary depending on the
nature of the business and its goals. The example above provides a general framework that can
be customized to suit different industries or organizations.

Annual Financial statements with practical example

Annual financial statements are financial reports that provide an overview of a company's
financial performance over a fiscal year, typically consisting of an income statement, statement
of financial position (balance sheet), and cash flow statement. Here's a practical example of
annual financial statements for a fictitious company, ABC Ltd., for the fiscal year ended 31
December 2020:
Income Statement:

Revenue 500,000
Cost of Goods Sold (300,000)
Gross Profit 200000
Expenses (100000)
Operating Profit 100,000
Interest Expense (20,000)
Profit before Tax 80,000
Income Tax Expense (20,000)
Net Profit 60,000

Statement of Financial Position:

Assets Amount Liabilities Amount

Current Assets 300,000 Current Liabilities 150,000
equity 200,000 Long-Term Debt 100,000
Total Assets 500,000 Total Liabilities 250,000
Equity Common Stock 100,000
Retained Earnings 150,000
| Total Equity | 250,000 | Total Liabilities and Equity| 500,000 |
Cash Flow Statement:

Cash flow amount

Cash flow from operating activities 100,000
Cash flow from investing activities (100,000)
Cash flow from financing activities 50,000
Net cash flow for the year 50,000

15
In this example, we can see that ABC Ltd. generated $500,000 in revenue and had a gross
profit of $200,000 for the fiscal year ended 31 December 2020. After deducting operating
expenses of $100,000 and interest expense of $20,000, the company's profit before tax was
$80,000. The company paid $20,000 in income tax, resulting in a net profit of $60,000.
On the statement of financial position, the company had $500,000 in total assets, consisting of
current assets of $300,000 and non-current assets of $200,000. The company's total liabilities
were $250,000, consisting of current liabilities of $150,000 and long-term debt of $100,000. The
company had total equity of $250,000, consisting of common stock of $100,000 and retained
earnings of $150,000.
Finally, on the cash flow statement, the company had positive cash flow from operating activities
of $100,000, negative cash flow from investing activities of $100,000 due to the purchase of a
new asset, and positive cash flow from financing activities of $50,000 due to an infusion of
equity capital. The company had a net cash flow of $50,000 for the year.

Federal Audit report

A federal audit report is a document issued by the government's auditor, typically the Federal
Audit Office, that provides an assessment of the financial and operational performance of
federal agencies and programs. The report typically includes findings, conclusions, and
recommendations to improve the management and use of federal funds and resources.
The Federal Audit Office is responsible for conducting audits of federal agencies and programs
to assess their compliance with laws and regulations, their effectiveness in achieving their
objectives, and their efficiency in using resources. These audits may be conducted annually or
as needed, depending on the agency or program being audited.
The federal audit report typically includes the following components:
1. Introduction: This provides a brief overview of the audit scope, objectives, and methodology.
2. Findings: This section identifies the major issues and deficiencies identified during the audit,
including any instances of non-compliance with laws or regulations and any weaknesses in
internal controls.
3. Conclusions: This section summarizes the overall assessment of the audit findings and their
implications for the agency or program being audited.
4. Recommendations: This section provides specific recommendations for addressing the
issues and deficiencies identified during the audit, including steps that the agency or program
should take to improve its financial and operational performance.
5. Management Response: This section includes the response of the agency or program being
audited to the recommendations provided in the report.
Federal audit reports are an important tool for ensuring accountability, transparency, and
effective use of federal funds and resources. They provide valuable information to federal
agencies, Congress, and the public, and help to improve the management and governance of
federal programs and initiatives.

16
Characteristics of Non-governmental NFP organizations
Non-governmental not-for-profit (NFP) organizations are organizations that operate without the
profit objective and are not managed by a government agency. Some of the key characteristics
of such organizations include:
1. Focus on mission: Non-governmental NFP organizations are usually created with a specific
mission or purpose, such as providing aid to the needy, improving health care, promoting
education, or advancing social justice. These organizations are often established by individuals
or groups who are passionate about a particular cause and seek to make a positive impact in
their community or society.
2. Non-profit status: Non-governmental NFP organizations are not-for-profit, which means that
they are not primarily focused on making a profit for their owners or shareholders. Instead, any
income generated by the organization is used to support its mission and objectives. These
organizations may also receive tax-exempt status from the government, which allows them to
avoid paying certain taxes.
3. Independent management: Non-governmental NFP organizations are not managed by a
government agency or by individuals who are elected by the public. Instead, they have an
independent management structure, which is usually composed of a board of directors or
trustees. These individuals are responsible for overseeing the organization's operations,
managing its finances, and ensuring that it complies with applicable laws and regulations.
4. Volunteer work force: Non-governmental NFP organizations rely heavily on the support of
volunteers, who donate their time and skills to help the organization achieve its mission. These
volunteers may be involved in a wide range of activities, from fundraising and event planning to
providing direct services to beneficiaries.
5. Donor funding: Non-governmental NFP organizations often rely on contributions from donors
to support their operations and fund their programs. These donations may come from
individuals, corporations, foundations, or government agencies. Donors may be motivated by
the desire to support a specific cause or organization, or by the tax incentives associated with
charitable giving.
6. Accountability and transparency: Non-governmental NFP organizations are accountable to
their stakeholders, including donors, beneficiaries, and the public. They are required to keep
accurate financial records, file annual reports with the government, and make their financial and
operational information available to the public. Many organizations also have internal controls
and governance structures in place to ensure that they are operating in an ethical and
transparent manner.

Charities and societies law in Ethiopia

The Charities and Societies Proclamation of 2009 is the primary legislation governing the
operations of charities and societies in Ethiopia. The Proclamation establishes a regulatory
framework for the management and operation of non-profit organizations (NPOs) in the country.
Some of the key provisions of the Proclamation include:

17
1. Registration: All charities and societies operating in Ethiopia must register with the Charities
and Societies Agency (ChSA), a regulatory body established under the Proclamation. The
registration process involves submitting an application form, along with supporting documents
and a registration fee.
2. Restrictions on Funding: Charities and societies may receive funding from foreign sources,
but the amount of funding must not exceed 10% of their total budget. They are also required to
obtain approval from the Ethiopian government before receiving such funds.
3. Prohibition of Political Activities: Charities and societies are barred from engaging in any
political activity, including supporting or opposing any political party or candidate.
4. Annual Reporting: Charities and societies must submit annual reports to the ChSA, detailing
their activities, financial statements, and other relevant information. These reports are subject to
review by the ChSA and can be made available to the public.
5. Suspension and Revocation: The ChSA has the power to suspend or revoke the registration
of a charity or society that violates the Proclamation, engages in fraudulent activities, or fails to
submit required reports in a timely manner.
In addition to the Charities and Societies Proclamation, charities and societies operating in
Ethiopia must also comply with other relevant laws and regulations, such as tax laws, labor
laws, and environmental regulations. Overall, the regulations aim to ensure that charities and
societies operate in a transparent and accountable manner and contribute to the development
of Ethiopia.

Financial reporting and accounting for NGOs

Financial reporting and accounting for NGOs (Non-Governmental Organizations) is a crucial
aspect of their operations. NGOs are typically non-profit organizations that rely on funding from
various sources, including donors, grants, and government agencies. Proper financial reporting
and accounting practices help ensure transparency, accountability, and compliance with legal
and regulatory requirements.
Here are some key considerations for financial reporting and accounting in NGOs:
1. Accounting System: NGOs should establish a robust accounting system to record all financial
transactions accurately. This system should include appropriate chart of accounts, general
ledger, subsidiary ledgers (such as accounts receivable and accounts payable), and a system
for tracking restricted funds.
2. Financial Statements: NGOs should prepare financial statements regularly to provide an
overview of their financial position, performance, and cash flows. The primary financial
statements include the statement of financial position (balance sheet), statement of activities
(income statement), statement of cash flows, and notes to the financial statements.
3. Fund Accounting: NGOs often receive funds designated for specific purposes or projects. It is
essential to maintain separate records for each fund to track income, expenses, assets,
liabilities, and net assets related to each fund separately.
4. Donor Reporting: NGOs must comply with donor reporting requirements by providing
accurate and timely reports on how the funds were utilized. These reports may include project-
specific financial statements or narrative reports detailing the use of funds.

18
5. Compliance with Regulations: NGOs must adhere to relevant accounting standards (such as
International Financial Reporting Standards or Generally Accepted Accounting Principles) as
well as local laws and regulations governing non-profit organizations' finances.
6. Internal Controls: Implementing strong internal controls helps prevent fraud, errors, or
misappropriation of funds within an NGO's operations. This includes segregation of duties,
regular internal audits, proper authorization procedures for expenditures, and effective oversight
by management or board members.
7. Budgeting: Developing an annual budget is crucial for planning NGO activities and monitoring
financial performance. The budget should align with the organization's strategic goals and
objectives, and actual results should be compared against the budget regularly.
8. Grant Management: NGOs often rely on grants for funding their projects. Effective grant
management involves tracking grant funds separately, ensuring compliance with grant terms
and conditions, and providing accurate financial reports to grantors.
9. Transparency and Accountability: NGOs should maintain transparency in their financial
reporting by making their financial statements available to stakeholders, including donors,
beneficiaries, and the public. This helps build trust and credibility.
10. External Audit: Conducting an external audit by an independent auditor provides an
additional level of assurance regarding the accuracy of an NGO's financial statements. It also
helps identify areas for improvement in financial management practices.
In summary, NGOs must establish robust financial reporting and accounting practices to ensure
transparency, accountability, compliance with regulations, and effective management of funds.
By doing so, they can demonstrate responsible stewardship of resources and enhance their
credibility among stakeholders.

19
Reference
 http://www.aabe.gov.et/
 https://www.pefa.org/sites/pefa/files/assessments/reports/ET-Harari-Oct10-
PFMPR-SN-Public.pdf
 https://www.scribd.com/document/532323203/UNIT-1
 https://www.pefa.org/sites/pefa/files/assessments/reports/ET-SNNPR-Oct10-
PFMPR-SN-Public.pdf
 https://eopcw.com/find/course/484/courses
 https://www.slideshare.net/Jaafar47/ethiopian-government-accounting-
systempptx

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