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PUBLIC SECTOR
ACCOUNTING &FINANCE
(P2.5)
Topic 1:
REDEEMER KRAH
dornkra@yahoo.com
OVERVIEW OF PUBLIC
SECTOR ENVIRONMENT
• The under the topic we will :
– Examine the nature and scope of
public sector in Ghana;
– Compare Public sector and the
private sector
– Examine the Composition of PSEs;
– Outline the justification of
existence of PSE;
– Examine the NPM in Ghanaian
Public sector and
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Characteristics of PSEs
• PSE demonstrate the following
characteristics that separate them from
commercial entities:
– They are established by a specific Act of
Parliament , Legislative Instrument or
Decree
– They are not profit making
– They are financed by government
through taxes and other levies
– They are accountable to parliament
– They are usually engaged in the provision
of public goods and services.
• Public goods and services are non-excludable
and non-divisible.
– Marginal pricing or subvented pricing is
used to price their outputs.
– Organisations take the form of
Ministries, Departments and Agencies,
Boards, commissions, Authorities etc
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Composition/structure
of PSE
• PSEs may the classified based on the
mode of financing or based on the
powers and operations.
• Regarding financing, PSEs may be
classified as:
– Ordinary entities, which are funded
wholly by national budget
(appropriation) e.g. MDAs
– Subvented entities, which are funded
partly from government subvention
(budget) and partly from their IGF. E.g.
Public universities like UPSA.
– Self-funding entities, those that obtain
their solely funds from their activities.
E.g GBEs, Authorities like GHAPOHA,
VRA, GRA etc.
Composition (cont)
• Regarding powers and operation,
PSEs may be classified as;
– MDAs which are central administrative
structures for implementing
government policies and programmes.
– Boards, Commission and Authorities.
These are singular purpose statutory
institutions with considerable level of
administrative autonomy.
– Public tertiary educational and
research institutions such as UPSA, UG,
CSIR etc
– Local government which is the MMDAs
– Public Corporations/ SOEs/ GBEs.
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Government Business
Enterprises (GBEs)
• Characteristics of GBEs according
to IPSAS include:
– They are granted the power to
contract in their own name.
– They are assigned financial and
operational authority to carry on
business
– They sell goods and services in the
normal course of business to other
entities at profit
– They do not reliant on continuous
government funding, and
– They are controlled by a PSE.
GBEs (cont)
• Funding of GBES include:
– Revenues from operation (sales of
goods and services)
– Borrowings
– Leasing
– Others
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Characteristics of NPM
• NPM involves:
• strengthening steering functions at
the centre;
• devolving authority, providing
flexibility;
• ensuring performance, control,
accountability;
• improving the management of
human resources;
• optimizing information technology;
• developing competition and choice;
• improving the quality of regulation;
and
• providing responsive service.
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Outsourcing of public
service delivery
• Outsourcing Defined
– A.k.a contracting out.
– Outsourcing refers to the practice
of contracting out to a private
sector provider certain processes
within the government entities.
– Contracting out government
projects from infrastructure
constructions to consulting services
has been practiced with the
growing popularity of the New
Public Management (NPM) concept.
Outsourcing
– Outsourcing government contracts
is one practice that is
recommended by practitioners and
advocates of NPM because this
model combines the use of
technology with technical expertise
– The financial and operational risk
rest with the government entity.
– The difference of outsourcing and
PPP is who bears the financial and
operational risk of the activity.
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Outsourcing
• Type of services outsourced in
PSEs include:
– Infrastructure
– Data management
– Recruitment process
– Revenue mobilization
– Application development and
management
– Customer support
– Security
Outsourcing-
• Benefits of outsourcing
– Improve efficiency in public service
delivery
– Strengthens the public institutions
politically through public approval
of the people as result of improve
service delivery
– It supports the idea of private
sector participation in the state
governance process
– It serves as catalyst for expanding
service provider capabilities and
intellectual capital for future use in
other
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Outsourcing
• Challenges of outsourcing
– It endangers privacy and security of
government systems
– It may be the means of “ shipping
work abroad”.
– Limited number of companies that
has the capacity to participate
– It may result in over dependence of
government entity on the private
sector
Outsourcing
• Factors to consider in outsourcing
– Issue of conflict of interest
– The capabilities and expertise of the
entity contractee
– The legal and government policy on
outsourcing of certain services
– Availability of potential service
providers
– National and organisational security
– Relevance of the activity to the
organisation- “core” or “peripheral”
– Cost savings.
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• BOO
– Here an infrastructure that needed to
be provided by government is given to
the private sector to build, owned and
operate it for the public benefit
• DBO
– Here, the public sector provides the
funding and the private sector is
engaged to design the project to meet
expected standards, build it and
operate it.
• Concession
– gives an operator the long term right
to use all utility assets conferred on
the operator, including responsibility
for all operation and investment. Asset
ownership remains with the
government.
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Objectives of PPP
• PPP policy of a government has the
following objectives;
– Encourage and promote increase
private sector participation in
development
– Increase availability of public
infrastructure at least cost to
government
– Leverage public assets with private
sector resources local and international
market
– It ensure risk sharing between the public
sector and private sector or risk transfer
to the private sector
– Improves the quality of public service
delivery by private expertise
– Sharing of mass expertise of the private
sector which is lacking in the public
sector.
Divestiture/Privatization
• Divestiture a.k.a privatization
occurs when all or substantially all
the interests of a government in a
utility asset or a sector are
transferred to the private sector.
• In most cases, the government
generally retains some indirect
form of control or mechanism for
regulation over the privatized
utility, in the form of a license
granted to the entity to deliver the
service to the public.
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Benefits of Divestiture
• The most cited benefits include:
– To increase economy and efficiency
in operating privatized entities
– To reduce the size of public sector
– To reduce public debt since
government most often borrow to
fund these entities
– To reduce government exposure to
commercial risk
– To provide opportunity to private
sector to grow through investment
in diversified entity
– Revenue from sales and taxes of
profit.
Demerits/risks of
privatization
• Some of the demerits and risks
include:
– Lost of job in the restructuring
process
– High cost of goods and services
since prices are determined by
demand and supply
– Diversion of government plans and
policy regarding the privatized
entity
– “Shipping of jobs” to foreign lands if
the entities are sold to foreigners.
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Word of wisdom:
“Purport in life to help
others and where you can’t
help do not hurt them”
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