Governance in the Public Sector: Responsibilities & Examples

Instructor: Morgan Gannarelli
In this lesson, we discuss the role of governance in the public sector. We discuss their principles and responsibilities as well as the importance of an audit committee to enforce the governance.

Governance in the Public Sector

In the public sector, governance is a combination of processes that a board implements to manage and monitor the organization's activities in achieving its objectives. Basically, governance is the means by which goals are determined and accomplished. There is a code of conduct implemented to ensure appropriate behavior and establish credibility. This is not just limited to corporations; governance in the public sector, like a public school, is equally important.

Governance is important in public and private sectors

Principles of Governance

To ensure success and ethical behavior, the following principles are used in public sector governance:

  • Setting direction: Policies guide the organization's actions through broad national goals, performance goals, or with strategic planning.
  • Instilling ethics: This is where you find a code of conduct or code of ethics. Policies and procedures will be in place that encourage employee behavior to be consistent with the public sector organization's code of ethics.
  • Overseeing results: Effective governance requires ensuring policies are implemented as they were intended and that the strategies are met. Is your organization in compliance with laws and regulations? A good governance will know the answer.
  • Accountability reporting: Public sector organizations must follow financial and performance standards. An audit can determine if the organization is performing accurate financial reporting. If the organization is not accurately reporting their financial statements, a penalty will be applied.
  • Correcting course: Governance systems are used to identify problems and make necessary corrections when needed. A good governance should be able to make these corrections quickly and effectively.

Audit Committees in the Public Sector

The Government Accountability Office (GAO) recommends public sector entities to have an audit committee. Having an audit committee helps ensure internal controls are in place and functioning. Typically, an audit committee will approve the audit scope, recommend an external auditor be appointed, oversee the financial statements, and make sure the audit is cost-effective. The audit committee needs to have three qualities: independence, communication, and accountability.

For example, the audit committee should not have a serving member that is also the entity's chief executive officer. This would not maintain independence.

Principles of Equity

The principles of equity are where public scrutiny comes into play. The public sector officials are granted money and power by the public. Sometimes the public feels there is a misuse of these funds and that there is poor management. Has an official been corrupted and is now making decisions for their own personal gain? While it may not happen often, it does happen. There are four areas that public sector equity is measured: service cost, service delivery, police and regulatory power, and exchange of information.

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