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Nature and Scope of the Public Sector
Home Level 2 2.5 Public Sector Accounting & Finance Archive by Category "Nature and Scope of the Public Sector"

Category: Nature and Scope of the Public Sector

2.5 Public Sector Accounting & FinanceLevel 2Nature and Scope of the Public Sector

Nov 2018 Q1 c.

One main difference between public sector and private sector entities is that their objectives are different. The objective of public sector entity is to deliver public goods and services to all citizens in order to maximize their welfare. However, the principal objective of the private sector entity is to make profit on the goods and services they produce and sell in the market.

Required:
Explain FOUR (4) reasons why these differences are important.                                                                                  (6 marks)

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  • Means of funding is different. Public sector entities are financed largely from the public resources resulting from taxes, levies and other public moneys whereas private sector is financed through capital contribution of owners such as shares. Therefore, public entities are collectively owned by the citizens without equity interest but equity interest is the basis of private ownership.
  • Accountability structures are different. Public sector entities are accountable to citizens through parliament but private entities are accountable to the shareholders through the board of directors.
  • The nature of goods and services they offer is different. Public sector is engaged in the provision of public goods and services which are non-excludable and non-divisible. Private sector is involved in the provision of private goods that are rivalry, divisible and discriminatory. Thus, public sector operates in a monopolistic market where private sector operates in a competitive market.
  • The regulatory environment is different. Public sector entities are established by a specific enactment of Parliament where as private sector entities are governed by general commercial enactments and other industry specific enactments.

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2.5 Public Sector Accounting & FinanceLevel 2Nature and Scope of the Public Sector

Nov 2017 Q1 d.

In every economy there exists dichotomy of sectors: public sector and the private sector. These two sectors co-existed in every economy symbiotic fashion. Most often private sector is hailed for superior performance in terms of economy, efficiency and accomplishment leading to the view that public sector should be done away with completely.

Required:
Identify FOUR consequences an economy is likely to face in the absence of public sector.                                             (4 marks)

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  • Slow Economic Development: Economic development mainly depends upon industrial development. Huge capital is required for establishment of such heavy & basic industries. This capital required for these industries is easily & readily made available by public sector but it is practically not possible for a private sector to run these industries.
  • Lack of Regional Development: Private sector usually neglect backward area. But public sector organizations set up their units in economically backward areas. By this public sector removes regional imbalance & brings regional development.
  • High Unemployment: Various public sector organisations operating in Ghana needs lot of manpower & this provide employment to unlimited individuals according to their education, experience & abilities. Without this there will be high unemployment.
  • Bad Service Motive: Public sector organizations are working with the only motive of providing public utility services to society at large irrespective of profit.
  • Lack of Infrastructure: Rapid industrial growth in a country needs sound infrastructure. Infrastructural industries require huge capital for construction of Roads, Railways, Electricity & many such industries. Private sector is unable to have such huge capital & that also without any high return but public sector can easily afford to provide all infrastructural facilities.
  • No Protection to Sick Industries: Public sector, to prevent sick unit closing down, takes over their responsibility & prevent many people from getting unemployed not only this but it prevents unnecessary locking of capital, land, building, machinery, etc.

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2.5 Public Sector Accounting & FinanceLevel 2Nature and Scope of the Public Sector

May 2017 Q1 a(i)

The current medium term strategic plan of Dumko Municipal Assembly (DMA) has overall objective of improving the performance of the Assembly. One critical strategy towards attainment of this goal is adoption of new public management strategy to increase participation of private sector in the provision of public services without losing sight of the differences between public sector and private sector. In fact, some of these differences are so fundamental that they cannot be washed away any time soon.

The Chief Executive suggested outsourcing as a key strategy in improving the delivery of public services at local level through the private sector. DMA is currently bedevilled with poor revenue mobilisation, lack of proper data on the Assembly’s activities, and poor infrastructure provision. Other supporting activities like cleaning and security are not well performed or performed at very high cost by internal staff. These issues have been tabled at the first strategy meeting convened by the Chief Executive.
Required:
i) Describe THREE fundamental differences between public sector and private sector entities that DMA should take cognizance of in pursuance of the new public management strategy.                                                                                                  (3 marks)

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  • Objectives are different. Objective of public sector entities is to deliver public goods and services to all citizens in order to maximize welfare of the citizenry. However, the principal objective of the private sector entities is to make profit on the goods and services they produce and sold in the market.
  • Means of funding is different. Public sector entities are financed largely from the public resources resulting from taxes, levies and other public moneys whereas private sector is financed through capital contribution of owners such as shares. Therefore, public entities are collectively owned by the citizens without equity interest but equity interest is the basis of private ownership.
  • Accountability structures are different. Public sector entities are accountable to citizens through parliament but private entities are accountable to the shareholders through the board of directors.
  • The nature of goods and services they offer is different. Public sector is engaged in the provision of public goods and services which are non-excludable and non-divisible. Private sector is involved in the provision of private goods that are rivalry, divisible and discriminatory. Thus, public sector operates in a monopolistic market while private sector operates in a competitive market.
  • The regulatory environment is different. Public sector entities are established by a specific enactment of Parliament whereas private sector entities are governed by general commercial enactments and other industry specific enactments.

View More