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WHAT IS PUBLIC SECTOR? – WELL EXPLAINED

WHAT IS PUBLIC SECTOR? – WELL EXPLAINED

what is public sector?

What Is The Meaning Of the Public Sector? You may be looking for the answer to what is public sector or the meaning of public sector, but have no worries because this article will focus on the comprehensive meaning of the public sector, the characteristics of public sector organizations, objectives of public sector organizations, classification of public sector organizations and difference between the public sector and private sector organization.

This lesson will consider The Meaning Of the Public Sector.

But for a proper view of the understanding of public sector accounting, we first have to know the meaning of the public sector.

MEANING OF PUBLIC SECTOR

The public sector consists of the government and all publicly controlled or publicly funded entities that deliver public programs, goods, or services. It is made up of entities established by law for the purpose of meeting the public interest without a profit-making motive.

The public sector comprises diverse organizations with different natures, each having objectives that focus on a different aspect of government overall objectives.

It covers the central government (that is governing body with a defined territorial authority including all departments, ministries, agencies, and other wings of the government that are integral parts of the structure, and are accountable to and report directly to the central authority such as the legislature, cabinet or executives head), regional government (which may include state or provincial government), local government and related government entities (such as boards, authorities, commissions, and enterprises), nationalized and public corporations.

CHARACTERISTICS OF PUBLIC SECTOR ORGANISATIONS

The public sector organization has Special features that distinguish them from other entities.

The following are the basic features of public sector organizations:

  1. They are established to meet public interest rather than making a profit.

Thus any surplus on the operation by way of excess income over expenditure is used to improve the quality of services they provide to the public.

2. They enjoy a legal monopoly.

Which is derived from the laws that established them, giving them an exclusive right over a certain activity they perform? So, they are allowed to be the sole provider of certain basic services which when left in the hand of the private sector will be provided at a higher price to the public.

3. They are financed largely from the central government fund known as the public fund.

Due to their source of funding, the financial reporting of the government organizations is usually based on vote or fund accounting system rather than equity accounting which is used by public businesses that are financially autonomous.

4. A high level of stewardship and accountability is required

To hold managers and public officers accountable for resources entrusted to them as their resources are from the public fund.

5. They provide services that meet the basic need of the public

These may include the provision of water, electricity, health, security, etc. these services are provided at subsidized prices to be within the means of the middle and low-income groups.

6. Performance measurement is based on the achievement of the objective and another non-financial measure rather than profit.

This may include input and output ratios, efforts and accomplishments, cost and benefits, etc.

7. They apply different accounting frameworks to meet the specific objectives of the organization.

OBJECTIVES OF PUBLIC SECTOR ORGANISATIONS

The objectives of public sector organizations are to a large extent influenced by the laws that established them, the political objectives, and the aspiration of the central government.

Generally, the public sector exists to meet the following objectives.

  1. To fulfill legal requirement s as may be contained in the laws established them
  2. To fulfill the stewardship and accountability function. This is normally achieved through the requirement of preparation of accounts showing how public funds have been utilized.
  3. To provide basic services to all citizenry within different income bracket at affordable prices
  4. To provide services outside the domain of the private sector. The private sector may not enter into the provision of these services due to huge capital investment requirements or low returns and therefore unattractive, though necessary.
  5. To help in the effective regulation and control of the key areas in the economy such as the area of health, education, social and economic.

CLASSIFICATION OF PUBLIC SECTOR ORGANIZATIONS

The public sector organizations can be classified on the basis of the nature of their operations or on the basis by which they are financed.

Classification Public sector organizations by their nature of operations

Public sector organizations can be classified into four, that is;

  1. The central Government

This is made up of government (that is the executive, legislature, and the Judiciary) and the ministries, Departments & Agencies (MDAs) of the government. The MDAs servers as the mechanism through which the central government operates.

They form the largest part of the public sector and are largely financed from the central funds of the government.

  1. The local government

This is made up of the local authorities such as the Metropolitan Assemblies, Municipal Assemblies, and District Assemblies. These organizations are supervised by the Regional Coordinating Council and operated under the Ministry of Local Government and Rural Development.

  1. Public Corporations and Government Business Enterprises (GBEs)

These are trading bodies that are wholly or partially owned or controlled by the government. They have, to a large extent, financial and operational independence, hence, their financial reporting is based on International Financial Reporting Standard (IFRS).

According to IPSAS 1, Presentation of financial statement, GBEs includes both trading enterprises, such as utilities and financial enterprises, such as financial institutions. GBEs are, in substance no different from entities conducting similar activities in the private sector.

GBEs generally operate to make a profit, although some may have limited community service obligations under which they are required to provide some individuals and organizations in the community with goods and services at either no charge or a significantly reduced charge.

A typical example of such entities is the Bank of Ghana, Tema Oil Refinery, Ghana Port and Harbor Authority, Agricultural Development Bank, etc.

The following are the basic features of GBEs in accordance with IPSAS 1.

  • It has the power to contract in its own name
  • Has been assigned the financial and operational authority to carry on a business.
  • It sells goods and services in the normal course of its business, to other entities at a profit or full cost recovery
  • Is not reliant on continuing government funding to be a going concern (other than purchases of outputs at arm’s length) and
  • Is controlled by a public sector entity.
  1. Public Boards and Authorities

These are public bodies set up by an Act of parliament to achieve specific objectives. For instance, higher education universities and polytechnics; Research Institute: Insurance-National insurance Commission, etc.

Classification Public sector organizations by their source of Funding

On the basis of mode or funding, public sector organizations can be classified into three, that is

  1. Organizations financed from the charges on services rendered to the public

These organizations are required to cover up their expenditure from the services rendered to the users of their services. They have the same financial status as that of the private commercial enterprises, thus adopt the same accounting practices such as application of the International Financial Reporting Standards (IFRSs) where ever possible.

In order to enhance easily recovery of expenditure, some are given some degree of monopoly based on the law that establishes them. Examples of such organizations are the Institute of Chartered Accountants, Ghana (ICAG), Ghana Airways, Ghana Broadcasting Corporation, State Insurance, Company, Drivers, Vehicle and Licensing Authority, etc.

  1. Organizations partly financed from the charges on services rendered to the public and partly from public funds.

These organizations meet the bulk of their expenditure from services rendered to the public and have to resort to subsidies from public funds to meet their expenditure in full. These organizations provide services and charges a minimal price thus not able to meet their expenditure in full from the services rendered to the public hence has to resort to a subsidy from the government. Example of such organization includes the Ghana Railway Corporation, Electricity Company of Ghana, Ghana Water Company, Public Universities, and Polytechnics, etc.

  1. Organizations financed from public funds

This basically consists of organizations established to provide services to the public at a relatively lower charge, on behalf of the central and the local government without any profit motives. The basic accounting requirement from these organizations is to record or account for the expenditure they incurred and ensure that they are adequately financed. The accounting requirement and accounting basis of these organizations may differ slightly from that of the private sector.

Even with the introduction of the International Public Sector Accounting Standard (IPSAS), the adaptation of the accrual principles may not bring much difference. Examples of such organizations are the Ministries, government departments and agencies, Metropolis, and District Assemblies.

DIFFERENCES BETWEEN PUBLIC SECTOR AND PRIVATE SECTOR ORGANISATION

We can now draw a distinction between public sector organizations and private sector organizations. Here are the differences:

  1. Accounting Concept

Private sector organizations apply accrual accounting basis whereas public sector applies to cash, modified accrual, commitment, or modified cash accounting basis in their financial reporting on the local financial regulations and state policies.

  1. Management

A private-sector organization is managed by a Board of Directors appointed by shareholders whereas a public sector organization is managed by members appointed by the government as its representatives.

  1. Financing

Private sector derived their financing from their core operations, loans, and equity but public sector organization generally derives their financing from the public fund.

  1. Purpose of establishment

The private sector has a profit-making motive but the public sector has a social motive with no profit-making as the purpose of establishment.

WHAT IS PUBLIC SECTOR EMPLOYEE

The government has most institutions working to help the citizens or the people living the country or stats, examples are the healthcare (hopitals), teaching, emergency services, armed forces, and various regulatory and administrative agencies in which the government needs people to handle the positions in other to manage the resource perfectly.

so now “what is public sector employee” they are work or employees employed by the government or the state to work on government agencies or companies which are being paid by the government from the states fund.

WHAT IS PUBLIC SECTOR BUSINESS

These are business owned and manage by the state or the government, and here is the government who choose a manager by members appointed by the government as it representatives.

WHAT IS PUBLIC SECTOR COMPANY

These are business owned and manage by the state or the government, and here is the government who choose a manager by members appointed by the government as it representatives.

Eric Adjei

Eric Adjei

A professional with six (8) years’ experience in finance and accounting. Demonstrating expertise in accounting procedures, computerized accounting system management and financial operations. Financially astute with excellent analytical, problem solving, management, people supervision, organizational, business administration, operation and commercial management and teaching skills.

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