The nature of the public

sector

Farah Rizkiah
Edwardo Herminaldo
FX Riza Febri K
D. Sukma Permana

The nature
Governance
Public
Accountants
Finance
Money
ofand
the public
the
government
public
management
sector

01. THE NATURE OF GOVERNMENT

Heart of Public Sector Sovereignty (controlled by politicians)

Elements of Government:
Elements of
governance

Head of
State:
King/Queen
, President

Executive

Legislative

Politics

Below sovereign gov Local Government

Judicative

01. THE NATURE OF GOVERNMENT

Characteristics of Local Government:
Dont make law

01. THE NATURE OF GOVERNMENT

Tax functions:
Redistribute income
Provide other economic incentives
Pay for Governing Public Services
A government refers to single organization for real, complex
set of element of government:
Private Sector private interest, paid for by private
Public Sector public interest, paid by tax
Voluntary Sector public interest, paid for by voluntary
contribution

01. THE NATURE OF GOVERNMENT

The core of government CONTROL

Modern
Control
1. Budgeting
2. Accounting

Accounting direct role

02. GOVERNANCE AND PUBLIC MANAGEMENT

Governance Management of each government organization and how that

management is held accountable to those charged with governance within that
organization.
Financial scandals happened so government needs Internal Control.

The 5 principle of Internal Control

02. GOVERNANCE AND PUBLIC MANAGEMENT

Government needs to maintain good relationship with other government, profit, nonprofit organization service specialist in order to deliver better public services

Modern government will co-operate with profit organization with Public Private
Partnership scheme (Build Operate Transfer, Build Transfer Operate)

Public management must copy good value of private management

03. PUBLIC FINANCE

PUBLIC FINANCE: GOVERNMENT

GOVERNMENT

Tax

Loan

Redistribute
income
Provide
economic
incentives
Pay for
governing
Provide
services for
public

Short-term
or Longterm
Free from
default
Taxpayers
bear the
financial
risks

Grant

From
national
government
s to state or
local
government
(central
pools of
public
money)

Fiskal
Catatan:
Terdapat bentuk pendanaan lain bagi pemerintah selain bentuk pendanaan di atas, misalnya penerimaan
atas jasa/layanan masyarakat, PNBP, dll.

PUBLIC FINANCE: FOR-PROFIT & NON-PROFIT

ORGANIZATIONS
FOR-PROFIT
ORGANIZATION

Equity

Loan

Revenue

NON-PROFIT
ORGANIZATION

Donat
ion

04. PUBLIC MONEY

Whats Public Money?

Other Peoples
Money

Money taken compulsorily

from taxpayers.

Accountants Responsibility

General
Public

Publics
Representative
s:
POLITICIAN

Separation between
providing services and
paying.
PARSIMONY

Example:
Rules requiring
the lowest
tenders from
contractors to be
accepted.
Low salaries of
public officials.

05. ACCOUNTANT AND PUBLIC SECTOR

The Accounting
profession having had
less influence over
government than it
does on the private
sectors.

Accounting technique
itself has less influence in
governments than it does
on the private sectors.

Example:
On two comparable
hospitals, one is taxfinanced (government
owned), the other is
charges-financed
(private owned).
The accounting
system of the
governments hospital
doesnt provide the
fundamental measure
of performance:
return of capital.

The Government
Accounting Technique
is of less interest to
voters than the public
companys to its
equivalent owners.

Voters have no significant

economic incentives to
understand the
government accounting
technique.

Institutional Reasons
for Accounting Bodies
in Government.

The Bodies are nonprofit, while the

individual and firm
members are forprofit.
Thus the non-profit
status of the body
imposes duties to
society as a whole,
not just the members
clients.
The majority of the
members work on
contract with their
client.
Even when the
member is employed,
theres still duties to
public interest.
The accounting and
auditing judgements
of the bodies are
apolitical.

Thank you