The effect of financial reporting on decision making in government institutions in Uganda; Case study: Nyendo-Ssenyange division Masaka municipality

Abstract

One of the important assumptions in decision making process and improvement of the economy is the existence of quality information which is used in decision making in an organisation. Significant number of this information comes from accounting information systems and from financial statements as they provide realistic and objective picture of the organisation. The need for effective decision making stems from the quality of financial reports produced by the organisation. While there are many organizations with good quality of financial reports, a sizeable number still seem to have inadequate and poor quality of financial reports which are used in decision making. However, quality and effectiveness of financial reports produced by the organization remains questionable. The study critically looked at the effect of financial reporting on decision making in an organization taking empirical case of Nyendo- Ssenyange Division. The study used empirical data acquired through questionnaires, review of records, and interviews with top management, support staff, accountants, and members of the finance committee. The data was analyzed both qualitatively and quantitatively to examine the effect of financial reporting on decision making in an organization. The study showed that there is a strong relationship between the financial reporting and decision making and that the quality of decisions made in an organization is based on the nature and the quality of the four major sets of financial reports. The key findings from the research show that the main financial reports used in decision making in the division are: statement of comprehensive income, financial position, changes in owner’s equity and statement of cash flows. The following are the major constraints; inadequate and untimely information, bureaucracy, inflation, government policy, lack of skilled human resource and lack of adherence to the work-plan. The study therefore concludes and recommends that to ensure efficient and effective decision making in an organization, the management should; ensure timely production of the financial reports, use of skilled human resource, sensitize the staff on the value of financial reports, and reinforce the use of the four sets of financial reports as required by the International Accounting Standards (IAS 1 and IFRS 2013)