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LESSON 1- PUBLIC SECTOR ENVIRONMENT-2023

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PUBLIC SECTOR ACCOUNTING
(BACT 406)
Lesson 1:
Overview of Public Sector
Environment in Ghana
• In this lesson we will:
– Examine the nature and scope of public sector in
Ghana;
– Compare Public sector and the private sector
– Examine the Composition of PSEs;
– Justify the existence of PSE;
– Examine the NPM in Ghanaian Public sector and
– Identify ethical considerations in Public Financial
Management.
2/14/2023
Redeemer Krah @ UPSA 2023
2
Nature and scope of Public sector
• Public sector refers to that part of the economy
which is significantly dominated by the activities of
government and its entities
• Nowadays, the term Public Service is mostly used in
place of public sector.
• There is no equity interest in these entities
• PS does not exist for profit but rather to provide
public services.
• PS is broad in scope and divest. While some operate
purely as non‐profit others operate on commercial
lines such as GBEs/SOEs
2/14/2023
Redeemer Krah @ UPSA 2023
3
Nature and scope (cont)
• PS entities demonstrate the following characteristics that separate
them from commercial entities:
– They are established by a specific Act of Parliament or Decree
– They are not profit making
– They are funded 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, non‐rival and
non‐divisible.
– Marginal pricing or Subvented pricing is used to price their
outputs.
– Organizations take the form of Ministries, Departments and
Agencies, Boards, Commissions, Authorities etc.
2/14/2023
Redeemer Krah @ UPSA 2023
4
Composition/structure of PSE
• PSEs may the classified based on the mode of
financing or based on the powers and operations.
• Regarding financing, PSE may be classified as:
– Ordinary entities, which are funded wholly by national
budget. 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 obtain their solely funds from
their activities. Eg GBEs, Authorities like GHAPOHA,
VRA, etc.
2/14/2023
Redeemer Krah @ UPSA 2023
5
Composition (cont)
• Covered entity under the PFM Act 2016:
– the Executive, Legislature and Judiciary;
– constitutional bodies;
– Ministries, Departments Agencies and local
government authorities;
– the public service;
– autonomous agencies; and
– statutory bodies;
 Give some examples of each category of covered
entity.
2/14/2023
Redeemer Krah @ UPSA 2023
6
Composition (cont)
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Redeemer Krah @ UPSA 2023
7
Composition (cont)
• Characteristics of GBEs in accordance with IPSAS
are:
– 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 rely on continuous government funding,
and
– They are controlled by a PSE.
2/14/2023
Redeemer Krah @ UPSA 2023
8
Justification of public Sector
• What do you think will happen when there is
no public sector other than the executive,
legislature and Judiciary?
– ………………………………………………………
– ……………………………………………………..
– ………………………………………………………
– ……………………………………………………..
– ……………………………………………………..
2/14/2023
Redeemer Krah @ UPSA 2023
9
Justification of existence of public
sector
– To provide basic goods and services at affordable
prices to all citizens regardless of their pocket
– To resolve inequality in service delivery across the
country.
– To ensure that certain goods and services are
provided on consistent basis. E.g. defense
– To assume control of certain key areas of the
economy.
– To substitute central planning in place of individual
choices.
2/14/2023
Redeemer Krah @ UPSA 2023
10
New Public management (NPM)
• NPM refers to the practices where proven business
management practices are adopted in the public sector to
improve economy, efficiency, and effectiveness in public
service delivery.
• There is a call on governments across the globe to improve
efficiency and accountability in public management.
• Therefore, the public sector is reaching out for business
practices in various ways.
• NPM is pivoted on Managerialism and Competition.
• Managerialism deals with use of private sector management
approach in public sector management,
• Competition means removing monopoly in public service
delivery and replace it with choice.
2/14/2023
Redeemer Krah @ UPSA 2023
11
NPM (cont)
• NPM takes various forms and styles including:
–Public‐private partnership*
–Privatization or divestiture
–Contracting out/ outsourcing*
–Output based budgeting
–Clientele service/ customer service
–Professionalization
–Increasing accountability and transparency in
governance
–Reforms/ change management
2/14/2023
Redeemer Krah @ UPSA 2023
12
NPM‐Outsourcing of public service delivery
• Outsourcing Defined
– It is also known as 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.
Slides are developed by Redeemer Krah. All rights reserved
@2023
Outsourcing (cont)
–Outsourcing government contracts is one practice
that is recommended by practitioners and advocates
of NPM because this business model combines the
use of technology with technical expertise
–The financial and operational risk rest with the
government entity.
–The difference between outsourcing and PPP is who
bears the financial and operational risk of the activity.
Slides are developed by Redeemer Krah. All rights reserved
@2023
Outsourcing (cont)
• Type of services outsourced
– Data management
– Recruitment process
– Revenue mobilization
– Application development and management
– Customer support
– Security
– Infrastructure
Slides are developed by Redeemer Krah. All rights reserved
@2023
Outsourcing (cont)
• 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
Slides are developed by Redeemer Krah. All rights reserved
@2023
Outsourcing (cont)
• 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
Slides are developed by Redeemer Krah. All rights reserved
@2023
Outsourcing (cont)
• Factors to consider in outsourcing
– Issue of conflict of interest
– The capabilities and expertise of the entity’s party to the contract
– The legal and government policy on outsourcing of certain services
– Availability of potential service providers
– National and organizational security
– Relevance of the activity to the organisation‐ “core” or “peripheral”
– Cost savings.
Slides are developed by Redeemer Krah. All rights reserved
@2023
NPM ‐ Public Private
Partnership (P3)
• Broadly, PPP refers to arrangements, typically medium
to long term, between the public and private sectors
whereby some of the services that fall under the
responsibilities of the public sector are provided by
the private sector, with clear agreement on shared
objectives for delivery of public infrastructure and/ or
public services.
• The traditional role of the Government as the primary
infrastructure and public service provider is gradually
being supplemented with private sector expertise and
financing.
2/14/2023
Redeemer Krah @ UPSA 2023
19
Types of PPP Arrangements
• There are several forms of PPP and the most common ones
are:
– Maintain and Operate (O&M)
– Build –Operate ‐Transfer (BOT)
– Build‐Transfer –Operate (BTO)
– Build‐Own – Operate (BOO)
– Rehabilitate‐Operate‐Transfer (ROT)
– Design‐Build –Operate (DBO)
– Concession
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Redeemer Krah @ UPSA 2023
20
• Maintain and Operate
– Here the private sector is allowed to manage and operate public
sector facility or service for a fee.
• BOT
– Here the private sector finances public infrastructure and allowed
to operate the facility for an agreed period and thereafter transfer
ownership to the government.
• BTO
– Is similar to BOT except that the infrastructure is transferred upon
completion to government and the private sector is allowed to
operate it thereafter
2/14/2023
Redeemer Krah @ UPSA 2023
21
• 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.
2/14/2023
Redeemer Krah @ UPSA 2023
22
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.
2/14/2023
Redeemer Krah @ UPSA 2023
23
Principles of PPP
• Guiding principles include:
–Value for money
–Risk allocation
–Ability to pay
–Local content and technology transfer
–Safeguarding public interest and consumer
rights
–Environment, climate and social safeguards.
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Redeemer Krah @ UPSA 2023
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1. Value for Money
• Value for money is paramount and PPPs should give
greater value for money than the best realistic public sector
project designed to achieve similar service outputs.
• Achieving value for money is a key requirement of
government at all stages of a project’s development and
procurement and is a combination of the service outcome
to be delivered by the private sector, together with the
degree of risk transfer and financial implications for
government
2/14/2023
Redeemer Krah @ UPSA 2023
25
2. Risk allocation
• An efficient risk allocation is vital in determining
whether value for money can be achieved in PPP
projects.
• Government’s principle with regards to risk allocation
shall be used to optimise, rather than maximise, the
transfer of project risks to the private party. Risks will
therefore be allocated to the party best able to
control and manage them in such a manner that
value for money is maximised
2/14/2023
Redeemer Krah @ UPSA 2023
26
3. Ability to Pay
• End user ability to pay shall be a key consideration
for all PPP projects.
• The PPP option must demonstrate long‐term
affordability to the public and overall Government
budgetary sustainability, forward commitments in
relation to public expenditure and the potential for
returns on private sector investment, given other
priorities and commitments.
2/14/2023
Redeemer Krah @ UPSA 2023
27
4. Local content & Tech Transfer
• PPP projects shall be structured to encourage the
maximum use of local content and technology transfer.
• As much as possible, the PPP arrangement shall
facilitate the promotion of local industries and the
private sector in Ghana.
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Redeemer Krah @ UPSA 2023
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5. Safeguarding PI and CR
• Government is committed to ensuring that each PPP
project shall have positive impact upon the public interest.
• The following principles shall be addressed in PPP
transactions:
– Safeguards to users particularly vulnerable groups;
– Setting affordable user charges and tariff structures
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Redeemer Krah @ UPSA 2023
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6. Env, Climate and Soc Safeguards
• The Government shall ensure that PPP activities
conform to the environmental laws of Ghana and the
highest standards of environmental, climate and social
safeguards.
2/14/2023
Redeemer Krah @ UPSA 2023
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Ethical Consideration in PFM
• Public financial management must be conducted in ethical and
professional manner.
• IFAC code of ethics gives five fundamental principles of code
of conduct for professional accountants, by extension public
financial management:
 Integrity
Objectivity
Professional competence and due care
Confidentiality
Professional behavior
What do these Principles mean to you as an individual?
2/14/2023
Redeemer Krah @ UPSA 2023
31
Common offenses under PFM
• S. 96 regards these as offenses:
–unauthorised commitment resulting in a financial
obligation for the Government,
–failure to collect moneys due to the Government,
– improper payment of public funds or payment of
money that is not duly verified in line with existing
procedures,
–deficiency in or for the loss, damage or destruction of
any public funds, stamp, security, stores any other
Government property
2/14/2023
Redeemer Krah @ UPSA 2023
32
Offenses in PFM
• Common offenses in PFM
acceptance or receipt of money or valuable
consideration for the performance of an official duty,
wilful making or signing a false certificate, false
return or false entry in a book,
failure to report knowledge or information in respect
of fraud committed by a person against the
Government, contrary to any enactment related to
public financial management, to the appropriate
authority or law enforcement authority
2/14/2023
Redeemer Krah @ UPSA 2023
33
Penalties
• Penalty for any of these commitments is:
–liable on summary conviction to a term of
imprisonment of not less than six months and not
more than five years
or
to a fine of not less than one hundred penalty units
and not more than two thousand, five hundred
penalty units
or
 to both
2/14/2023
Redeemer Krah @ UPSA 2023
34
Offenses relating to Excess Spending
• A public officer who authorises an expenditure exceeding the
approved appropriation in the relevant budget commits an
offence.
• Penalty
liable on summary conviction to a term of imprisonment of
not less than six months and not more than twelve months or
to a fine of not more than the value of the assessed impact of
the commitment or to both.
2/14/2023
Redeemer Krah @ UPSA 2023
35
Others offenses
• A person who promises, offers or gives money or any other
valuable consideration to a person engage in public financial
management to influence him or her to take decisions or
action or commit fraud against the government or to connive
with fraud action commits an offense(S.96‐3).
• Penalty
liable on summary conviction to a fine of not more than
three times the amount offered or accepted or a term of
imprisonment of not less than six months and not more than
two years or to both.
2/14/2023
Redeemer Krah @ UPSA 2023
36
Offense relating to Non‐compliance
• S.98 provides that a person commits an offense when he:
refuses or fails to produce or submit any information
required under this Act,
issues a local purchase order outside the Ghana Integrated
Financial Management Information System or any other
electronic platform in use by Government,
misuses or permits the misuse of any Government property
which results in a loss of public resources,
contravenes or knowingly permits another person to
contravene a provision of this Act or the Regulations, or
 instigates another person to contravene a provision of this
Act or the Regulations
2/14/2023
Redeemer Krah @ UPSA 2023
37
Offense relating to non‐compliance
• Penalty
where no penalty is provided for the offence, is liable
on summary conviction to a fine of not less than one
hundred and fifty penalty units and not more than
two hundred and fifty penalty units or to a term of
imprisonment of not less than six months and not
more than two years or to both.
• Additional penalty:
liable for any liability contracted on behalf of
Government as a result of the contravention; and
subject to disciplinary action by Government
including dismissal, demotion or suspension.
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Redeemer Krah @ UPSA 2023
38
Trial questions
1. Give four differences between public sector and private
sector.
2. Explain the three categories of public sector entities based on
how they fund their operations.
3. Give four reasons for the existence of public sector in Ghana.
4. What is NPM? Outline its main objectives.
5. Explain managerialism and competition as tools for improving
public sector management.
6. Outline four (4) objectives of PPP.
7. Explain five (5) key guiding principles of PPP.
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Redeemer Krah @ UPSA 2023
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Redeemer Krah @ UPSA 2023
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