FINANCIAL MANAGEMENT IN PUBLIC SECTOR UNIT

Presented by :Nitin Malusare (18 ) Amol Patil ( 19 )

PUBLIC SECTOR
The public sector is that portion of society controlled by national, state or provincial, and local governments. the public sector encompasses universal, critical services such as national defense, homeland security, police protection, fire fighting, urban planning, corrections, taxation, and various social programs.

INTRODUCTION
Before independence, there was almost no Public sector in Indian economy. After independence India adopted the road of planned economic development through Five year plans. The passage of Industrial Policy Resolution of 1956 and adoption of socialist pattern of society as the national economic goal of the country built the foundation of the dominant public sector as we see it today.

EVOLUTION OF PUBLIC SECTOR IN INDIA

To help in the rapid economic growth and Industrialization of the country and create necessary infrastructure for economic development. To earn return on investment and utilize resources for development. To promote redistribution of income and wealth. To create employment opportunities. To promote balanced regional development. To promote import substitutions, save and earn foreign exchanges for the economy.

The objectives of public sector enterprises

1. Economic objectives i. Economic development ii. Planned growth iii. Balanced regional development iv. Generation of surplus v. Provide employment

2. Social objectives Control monopoly distribution of wealth Provision of essential goods and services Takeover of sick units
3. Political objectives i. Public interest ii. National defence iii. Socialism

DISTINCTION BETWEEN PUBLIC SECTOR AND PRIVATE SECTOR ACCOUNTING

Different Accounting System - Private sector accounts are prepared on accrual basis i.e. earning and spending etc. but public sector accounts are maintained on cash basis i.e. cash receipt and cash payment Profit or Loss - The purpose of public sector account is to depict accountability to the legislature while private sector accounts try to depict commercial profit earned for the year ended. Balance Sheet - In private sector accounts, balance sheet shows assets and liabilities on a cumulative basis but in case of public sector accounting, the current years expenditures as well as capital receipts are shown Equation - In private sector accounting equation of assets and liabilities takes the following form: Capital, Surplus, Other liabilities; Fixed assets, Current assets, Investments. But in case of public sector accounting equation takes the following form: Public sector account receivables-Payables

 Depreciation - In private sector accounts, depreciation is charged on income statement to arrive at true profit or lossBut in case of public sector accounting, there is no provision for providing depreciation. It lost its relevance in providing depreciation in absence of proper value of asset; but in certain cases like Transportation Company which charges depreciation for maintaining its assets. System of Entry - Under private sector accounting, double entry system is followed and journal, ledger, trial balance can be prepared. But in the case of public sector accounting, single entry system is followed

What is Public Sector Management?

The public sector comprises upstream core ministries and central agencies, downstream bodies including sector ministries, and nonexecutive state institutions. Upstream bodies include core ministries and agencies at the center of government, such as the Ministry of Finance and the offices that support the head of government, which have functions that cut across sectors. Downstream bodies include both sector ministries and agencies, including education and health providers which deliver and fund services under the policy direction of government. They also include a diverse group of more autonomous bodies such as regulators and State-Owned Enterprises and corporate bodies which, in many countries, still provide the majority of infrastructure services despite extensive privatization. Non-executive state institutions include judiciaries,3 legislatures and institutions such as Supreme Audit Institutions.

Public Sector Organizations and Functions

The Public Sector
Center of Government / Upstream Sector Agencies/ SOEs and corporate bodies/ Downstream

and its functions

Sector Outputs: Services Regulations Infrastructure investments Sector policies

Fiscal and Institutional Sustainability: Realistic and achievable revenue targets Cooperation between levels of government Support for oversight bodies Effective management of fiscal policy and aggregates

Objective and Subjective Development Outcomes

 Downstream, the public sector delivers outputs that directly matter to citizens and firms . It provides firms and households with services, such as health and education, housing, transport, electricity or security, through direct provision and through funding. The public sector is also responsible for some less tangible but equally critical outcomes. It must encourage both fiscal and institutional sustainability. It must provide systems and processes that enable governments to manage public revenues, expenditures and debt ensuring that they remain within agreed fiscal aggregates. It must manage the allocation of fiscal, administrative and functional authorities across levels of government in a way that ensures cooperative and constructive engagement between them. The public sector must also work with and support accountability and governance mechanisms (judiciaries, legislatures and other non-executive state institutions such as Supreme Audit Institutions) to ensure that they provide transparency through credible arms-length oversight.

 How these public sector results are achieved matters. The subjective individual, household and firm perception of being well-governed is a desired outcome of well-functioning public sector arrangements, not least because a trusted government is one which generates less resistance from tax payers. In other words, the public sector is not only important for what it does, it is also important for how it is seen to do it.

Why does it matter?

The size and economic significance of the public sector make it a major contributor to growth and social welfare. It is important to understand, and improve, what it is achieving with its very significant expenditures . Its achievements emerge in the quality and nature of the services it provides, the infrastructure it finances or underwrites and the quality of its social and economic regulation and its sector policy objectives. How well those public sector activities are managed is a key development variable.

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