Corporate Governance’s relevance to Public Services

By Priya Chetty on January 11, 2012

The principles or corporate governance are not new and apply to all organizations equally. However, public companies are inherently different to public service bodies as they are subject to a common statutory framework and share similar objectives, legal and managerial structures, and external reporting responsibilities. Organizations within the public sector are subject to a wide assortment of different legislative requirements and are more diverse in terms of their structure, scope and objectives.

  1. The main characteristics that define the public services and distinguish them from the private sector are:
  2. The level and nature of services are determined by political choices;
  3. Public service bodies have to satisfy a more complex set of political, economic and social objectives than a commercial company, and are subject to a different set of external constrains and influences.
  4. Public service bodies are subject to forms of accountability to their various stakeholders, including the community at large and higher levels of government, that are different to those, which a company owes to its shareholders.
  5. Public service bodies are expected to manage their affairs in accordance with a public service philosophy, based on a distinct set of values and the highest ethical standards of probity and propriety, which apply in particular to the handling of public money.

In most areas of the public services, auditors have a wider range of  responsibilities for   reporting on the activities of organizations that is the case in the corporate sector, covering not only the financial statements, but also ‘value for money’ and public interest issues.