Public Sector Accounting ACC 4410

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Public Sector AccountingACC 4410

• Part 1
• Introduction to Public Sector Accounting

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WHAT IS PUBLIC SECTOR?

• Those industries and services in a country that
  are owned and run by the state, such as (by many
  countries) the education services and the
  railways
• Longman Dictionary of
  Contemporary English
• a device for regulating human activities so that
  man and women can live together in reasonable
  harmony Derbyshire (1987)
• any entities, established owned by central,
  state or local government and any entity
  established under any Act of Parliament, which
  requires the presentation of the annual financial
  statement to the Parliament
• 
  MACPA Guideline No. 1 1990

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Forms of Government

• Absolute monarchy
• One person rule
• Aristocracy
• wealthy minority rule
• Democracy
• based on a belief in the value of the individual
• eg choice of selecting representatives
• Make criticism?
• Rights being protected?
• Taking part in politics?
• Public interest is a priority?

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Important definitions

• Power
• The ability to get things done
• Authority
• The right to get things done (formal evidence to
  power)
• Nation
• A group of people, often from a different
  backgrounds or races, live together and adopt a
  common identity
• State
• the whole apparatus of government that a a
  nation sets up
• Nation state
• A government formed by a group of people, often
  from a different backgrounds or races, adopt a
  common identity and live together peacefully (as
  opposed to artificial state)
• Constitutional state
• A government with a written system
  (constitution), which incorporate a bills of
  rights guaranteeing individual freedoms
• Constitution
• Basic law of a state that sets out the system of
  a government

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Objectives of Public Sector

• To preserve law and order minimum interference in
  social affair
• Regulating aspects of industry and economy
• The provision of services and public goods to the
  society or the people
• Defence, security, law, health, education,
  transportation, international diplomacy etc.
• Various agencies, government departments and
  public enterprises were set up to realise the
  provision of the services and public goods
• Public administration, defence, internal security
  and laws

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Features of Public Sector

• No individual shares of ownership
• Operate within a framework of public
• authorization and control
• Plurality of objectives
• No direct financial interest or benefits to the
  contributors of resources
• Varying accounting principles and practices
• Political rather than financial control

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Components of Public Sector

• Federal or Sovereign Government
• Ministries
• Government Departments
• Statutory Bodies
• Non-statutory Bodies (Government linked companies
  (GLCs))
• State Government
• State Departments
• Statutory Bodies
• Local Government
• City Council
• Municipal Council
• District Council

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WHAT IS PUBLIC SECTOR ACCOUNTING?

• a process of identifying, measuring, recording
  and communicating public sector economic
  information to permit informed judgment and
  decisions by the users .
• Process of studying the accounting practices of
  public sector organizations in ensuring
  accountability in providing services to the
  public at large.

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Objectives of PSA

• To execute the function of custodianship and
  stewardship over public resources
• To discharge public accountability over all kind
  of public resources
• To establish an appropriate accounting system for
  the purpose of accounting public monies and
  assets

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Economy, Effectiveness and Efficiency (3Es)

• Economy
• Concern with inputs (costs)
• A relative measure
• Effectiveness
• The meeting of certain objectives concern only
  with outputs
• A relative measure
• Efficiency
• The most important concept and all-embracing of
  the three
• Efficiency can be measured by ratio
  OUTPUT/INPUT or INPUT/OUTPUT e.g ROCE
  Profit/Capital Employed

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3Es

• 4 ways to improve efficiency
• i. increasing output of the same input
• ii. Increasing output by a greater proportion
  than the proportionate increase in input
• iii. Decreasing input for the same output
• iv. Decreasing input by a greater proportion
  than a proportionate decrease in output

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3Es

• In theory, efficiency provides the basis of
  relative performance evaluation
• There are problems in comparability as public
  sectors are different in size, nature and
  objectives
• Factors to be considered in making comparison of
  performance of public sectors
• Quality of services?
• Performance over time?
• Performance of geographical areas?
• Reliability of financial information?
• Differences in political and ideological belief?