INTRODUCTION

Lecture One

Learning Outcomes
At the end of this lecture, students
should be able to:
Explain what is public sector
Explain the objectives and features of
public sectors
Discuss the meaning of accountability,
stewardship and 3Es
May 2011 Dr. Morni Hayati

What is Public Sector?

May 2011

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 and 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
4

Objectives of Public Sector

To

preserve law and order with minimum

interference in social affair;
Regulating aspects of industry and
economy;
The provision of services and public goods
to the society or the people;
Defense, 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, defense, internal security and laws
Licensing & permits Creation and regulation for
Companies, NGOs, Societies.
Updated May 2011 by Dr Morni Hayati

Features of Public Sector

Complex and diverse but commonly share
the following features:
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

Public Sector vs. Private Sector

CHARACTERISTICS

PUBLIC SECTOR

PRIVATE SECTOR

Objectives and
accounting
practices

To provide services based

on social need
not make a profit,

To maximize profit.

Rules and
regulations

Strict control of legislation

(budgetary authorisation) to
ensure accountability and
compliance on the use of
public resources

Market forces able to regulate

activity of companies.

Owner of entity

Collectively owned by the

public. Government has the
responsibility to provide
goods and services.

Owned by shareholders who

are entitled to return on
investment, but not necessarily
receive goods or services from
the companies.

Relationship with
recipients of goods
and services

Forced contribution through

taxation. Contributors of
resources receive neither
proportionate equity interest
nor financial benefit from
operations

Direct relationship:
Customers receive goods or
services they paid for.
Shareholders receive return on
their investment based on their
level of contributions.

Public Sector vs. Private Sector

Governments have three major powers that
are not available to businesses:
Authority to enact legislation by which the
constituency must abide.
Authority to levy taxes to support the activities
of government.
Authority to conduct monopoly enterprises in
certain operations where charges are made to
the users of certain services or products based
upon the amount of service or product received
(e.g. public utilities).

Public Sector Concepts

Stewardship
Accountability
Economy, Effectiveness, Efficiency (the
3 Es)

July 2006

Stewardship
the duty to provide
an account on the
uses of the resources
and not the effect of
the uses or the
purposes of
entrusting the
resources to the
steward (Gray, et.al,
1991)
July 2006

10

Stewardship

"the holding of
someone else's
assets by a steward,
[in which] the
responsibility of
stewardship is to
demonstrate that
those assets have
not been
misappropriated
(Jones and
Pendlebury, 2000, p.

May 2011

11

Accountability
the giving and demand for reasons for
conduct
(Roberts & Scapens,
1985)

the duty to provide an account (by no

means necessarily an account) or
reckoning those action for which one is
held responsible (Gray, et. al, 1996)
government accountability as the duty
of public officials to report their actions to
the citizens and the rights of the citizens to
take action against those officials, whose
conduct the citizen unsatisfactory.
(Tocqueville, 2000)
July 2006

12

Types of Accountability

Financial Accountability
The responsibility of government to comply with all
laws, rules and regulations in performing all their
functions

Programme Accountability
The responsibility of government personnel to
ensure that the objectives of the individual
programme and activity of government
organizations are achieved

Management Accountability
The responsibility of the management of govt
organization to ensure there is effective, efficient
and economic utilization of government resources
under their control
May 2011

13

The relationship between

accountability and Stewardship

Stewardship
PUBLIC

GOVERNMENT

Accountability

July 2006

14

July 2006

15

Questions to ponder?
Why is public sector
accountable to the public?
How to achieve public
accountability?
Why there is an increase
concern on Public Sector
accountability?
Accountability from the
perspective of Islam?

July 2006

16

Why accountability cannot be fully

achieved in public sectors?
No real directives or clear definitions of
scope of accountability of civil servants
Insufficient post created in enhancing better
accountability
Failure of internal control system
Resistance to change
Failure to recognize relationship between
business processes and records
Lack of top management support
July 2006

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Recommendations to Improve
Accountability in Public Sector
Disciplinary actions to staffs who
failed to perform tasks
Create sufficient post
Set up audit committee
Cooperation from other parties
Continuous revision of policies and
circulars
Effective recording system
July 2006

18

3Es concept (Value For

Money)
Economy

Efficiency

Effectiveness
19

3 Es
Measurement of Accountability

Economy - inputs
Cheapest possible

Efficiency process
Achieved objectives at satisfactory cost
Output/Input Ratio

Effectiveness outputs
Achievement of objectives
The extent to which a programme or project meets
its predetermined objectives

End of Lecture 1

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