4.1 What is a Reporting Entity?

Definition: A public sector reporting entity is any government or other public sector organization, program, or identifiable area of activity that prepares general-purpose financial reports.

The framework states: “A public sector reporting entity may comprise two or more separate entities that present GPFRs as if they are a single entity—such a reporting entity is referred to as a group reporting entity.”

This definition is deliberately broad to accommodate the diverse structures in public sector organizations.

4.2 Key Characteristics of a Reporting Entity

The framework identifies two key characteristics that signal whether an entity should prepare GPFRs:

Characteristic 1: Resource Management

“It is an entity that raises resources from, or on behalf of, constituents and/or uses resources to undertake activities for the benefit of, or on behalf of, those constituents.”

What this means: The entity is involved in:

• Collecting public funds (taxes, grants, fees, licenses)
• Deploying resources to provide services
• Managing public assets
• Implementing government policies
• Delivering services to constituents

Example: The National Hospital Insurance Fund (NHIF):

• Raises resources (contributions from employees and employers)
• Uses resources (pays healthcare providers)
• Undertakes activities (provides health insurance coverage)
• Benefits constituents (Kenyan workers and their families)

This makes NHIF a distinct reporting entity that must prepare GPFRs.

Characteristic 2: User Dependence

“There exist service recipients or resource providers who are dependent on GPFRs of the entity for information for accountability or decision-making purposes.”

What this means: There are users who:

• Cannot demand customized financial information from the entity
• Rely on publicly available general-purpose reports
• Need this information to assess accountability or make decisions

Example: Residents of Embu County:

• Cannot individually request custom financial reports from the county treasurer
• Depend on the county’s annual financial statements to know how county funds were used
• Use this information to assess the county executive’s performance and participate in public budget hearings

This dependence on GPFRs makes Embu County a reporting entity.

4.3 Determining the Reporting Entity in Kenya

In Kenya, the Public Finance Management Act and other laws specify which entities must prepare financial statements, aligning with the framework’s principles.

Examples of Reporting Entities:

National Level:

• The National Government (consolidated accounts)
• Each ministry and state department
• State corporations (Kenya Power, Kenya Ports Authority, KRA)
• Constitutional commissions (IEBC, Commission on Revenue Allocation)
• Statutory funds (NSSF, Road Maintenance Levy Fund)

County Level:

• Each of the 47 County Governments
• County executive departments (individually and consolidated)
• County agencies and boards
• County revenue funds

Other Public Entities:

• Public universities (University of Nairobi, Kenyatta University)
• National and county referral hospitals
• Regulatory bodies (Communications Authority, EPRA)

4.4 Factors Signaling the Existence of a Reporting Entity

The framework provides guidance on indicators that a reporting entity exists:

“The factors that are likely to signal the existence of users of GPFRs of a public sector entity or group of entities include an entity having the responsibility or capacity to raise or deploy resources, acquire or manage public assets, incur liabilities, or undertake activities to achieve service delivery objectives.”

Scale Matters:

“The greater the resources that a public sector entity raises, manages and/or has the capacity to deploy, the greater the liabilities it incurs and the greater the economic or social impact of its activities, the more likely it is that there will exist service recipients or resource providers who are dependent on GPFRs for information about it.”

Clear Cases:

It’s clear that reporting entities exist for:

• Government of Kenya at national level (enormous resources and nationwide impact)
• Each of 47 county governments (substantial local resources and services)
• Major state corporations (critical infrastructure and essential services)

Less Clear Cases:

Professional judgment may be needed for:

• Small government agencies
• Specific programs within ministries
• Internal administrative units

Example: Consider a specific donor-funded health program within the Ministry of Health worth Ksh 500 million annually:

Factors suggesting it’s a reporting entity:

• Donors require separate accountability
• Significant resources (Ksh 500 million)
• Important service delivery impact (e.g., malaria prevention)
• Stakeholders (donors, beneficiaries, civil society) depend on financial information

Factors suggesting it’s not a separate reporting entity:

• Can be adequately reported as a segment within Ministry of Health’s reports
• No separate legal identity
• Ministry’s overall GPFR can disclose program performance

The determination requires professional judgment balancing user needs against the cost of preparing separate GPFRs.

4.5 Legal Identity vs. Reporting Boundaries

Important Principle: A reporting entity may or may not have a separate legal identity.

The framework states: “The government and some other public sector entities have a separate identity or standing in law (a legal identity). However, public sector organizations, programs and activities without a separate legal identity may also raise or deploy resources, acquire or manage public assets, incur liabilities, undertake activities to achieve service delivery objectives or otherwise implement government policy.”

What This Means:

Legal Entity Without Separate GPFRs:

A ministry in Kenya (e.g., Ministry of Health) doesn’t have its own legal personality separate from the government, yet it produces Appropriation Accounts for accountability to Parliament.

Non-Legal Entity With GPFRs:

A government program or fund might prepare financial reports even without separate legal existence if users depend on that information.

Example: The Free Maternal Healthcare program operates within county health departments. It’s not a separate legal entity, but if:

• Parliament allocates specific funds for this program
• County Assemblies want to track program performance
• Citizens need to see how maternal health funds are used

Then counties might report on this program separately within their GPFRs (e.g., as segment information or supplementary schedules) to meet accountability needs.

The focus is on meeting users’ information needs, not following legal structures.

4.6 Group Reporting Entities

Definition: A group reporting entity comprises two or more separate entities that present GPFRs as if they are a single entity.

This is consolidation—combining multiple entities into one comprehensive report.

National Level Consolidation:

The National Government’s consolidated financial statements combine:

• All ministries and state departments
• The Judiciary
• Parliament
• Constitutional commissions
• Some agencies and funds

This provides a whole-of-government view rather than fragmented individual reports.

Example: National Treasury prepares consolidated accounts showing:

• Total national government assets (land, buildings, equipment, infrastructure)
• Total liabilities (public debt, pension obligations, pending bills)
• Total revenue (taxes, grants, non-tax revenue)
• Total expenditure (recurrent and development across all votes)

This comprehensive view allows Parliament and citizens to assess the national government’s overall fiscal position and sustainability.

County Level Consolidation:

A county government’s consolidated financial statements include:

• County executive departments (health, infrastructure, agriculture, etc.)
• County assembly
• County boards and agencies (if controlled by the county)
• County revenue fund

Example: Nairobi City County’s consolidated report shows:

• Not just the county executive’s finances
• But also the county assembly’s spending
• And county-controlled entities like parking management boards
• Giving a complete picture of Nairobi’s public finances

Why Group Reporting Matters:

The framework explains group reporting is essential because:

• It shows the complete financial picture
• It prevents hiding poor performance by looking only at favorable individual units
• It enables assessment of overall fiscal sustainability
• It shows the full extent of government control and accountability

Example: If Nairobi City County reported only its core departments but excluded its water company, market boards, and other agencies, stakeholders wouldn’t see:

• The county’s true debt position (if agencies have borrowing)
• The full cost of services (if some costs are in agencies)
• The complete asset holdings (if agencies hold land and equipment)

Group reporting consolidates all controlled entities to show the county’s complete financial health.

4.7 Professional Judgment in Application

The framework acknowledges: “Determining whether these organizations, programs or activities should be identified as reporting entities and, consequently, be required to prepare GPFRs will involve the exercise of professional judgment.”

Key Considerations:

User Needs:

Are there service recipients or resource providers who depend on separate GPFRs for this entity?

Cost-Benefit:

The framework reminds us: “The preparation of GPFRs is not a cost-free process. Therefore, if the imposition of financial reporting requirements is to be efficient and effective, it is important that only those public sector entities for which such users exist are required to prepare GPFRs.”

Alternative Mechanisms:

Sometimes user needs can be met through segment disclosures or supplementary schedules within a larger entity’s GPFR rather than requiring completely separate reports.

Example: Instead of requiring every county department to prepare full GPFRs, a county’s consolidated financial statements might include:

• Segment information by department (health, roads, agriculture)
• Supplementary schedules for major programs (school bursaries, youth empowerment)
• Notes disclosing departmental performance against budgets

This provides accountability while avoiding the cost of preparing 10+ separate complete GPFRs for each department.