Our work at the ASB relies on finance professionals in the development and implementation of Standards; as well as the auditing of the financial statements prepared using Standards of GRAP. The involvement of finance professionals in our work ensures that what we do is credible, relevant to the sector, and the Standards can be implemented. It goes without saying that we have a keen interest in the next generation of finance professionals.
In late July I spent time with the CTA students at the University of Johannesburg talking about the evolution of accounting and how accounting and reporting differs in the public sector. While you can access the full video of the session on YouTube, I thought I would share highlights.
The evolution of accounting
You may have heard of “accountants” being bean counters. The traditional role of accountants (to as far back as the Sumerians) was keeping record of gold, silver, and the “things” people traded to make a living – in the past it was spices, silk, animals, tea, coffee, etc. As society became more sophisticated, so too did the role of the accountant.
We know now that accounting and reporting extends to accounting for not just the money we have and the “things” we trade, but all the resources we have at our disposal and ultimately the value we added and the impact of organisation’s efforts.
Accountants have evolved from being bean counters to being story tellers. While being a storyteller applies to both the public and private sectors, it is in the public sector that the story is the most interesting. The story can be about how your organisation plays a role in changing lives and contributes to a sustainable world.
What makes the public sector different
The principles of accounting remain the same across the private and public sectors. However, who uses the information in the financial statements and what they do with the information is different. In the private sector, the focus is on investors and whether they will receive a return on or of capital. In the public sector, the users are those who provide resources to government (taxpayers, ratepayers, lenders, creditors, donors) and those who do, or can, benefit from government’s services. Together, the providers of resources and recipients of services need information to hold officials accountable and make financial, economic, and policy decisions. The focus is not only financial returns to a limited group of users – it’s about the use of public resources to provide essential goods and services to citizens and communities.
The public sector has a few unique characteristics:
- Government and its entities often give goods and services away; or receive goods and services without giving approximately equal value in return, or value is not provided directly in return.
- The role that government plays means that is has custody over land, natural resources (fauna, flora, minerals, water) and the country’s heritage. Being a custodian does not always mean that government or its entities control these resources in a way that they result in assets on the financial statements; it means they are responsible for protecting, maintaining and using them in the public interest for current and future generations.
- There are rights government can grant itself and other parties, for example, passing legislation that gives government the right to tax, levy fees, issue licences for certain activities, etc.
Accounting in the public sector is thought provoking, exciting, and still holds much to explore.
Being part of the journey to improve accounting and reporting in the public sector has been a truly rewarding experience; and I hope that many more aspiring finance professionals choose the same journey.