The three characteristics that distinguish public sector organizations from private entities and emphasize the need for accountability are purpose, ownership, and funding. A private company can measure its success by the profit it makes, since this is its main objective. This may be qualified by reporting the achievement of secondary objectives, such as retaining a certain percentage of a quality market, employing people, reducing pollution, or earning export dollars.
The public sector has different primary objectives than the private sector. These are a mix of social, political and macroeconomic objectives. Issues such as employment, interest rates, exchange rates, inflation, social property and public opinion may have a primary claim on the attention of the government in power. At an operational level, organizations are concerned with the quality, frequency, quantity, and value for money of the service being provided.
Of these operational objectives, only value for money can be measured in dollar terms, but it cannot be measured at all if the other dimensions of the service are not known. For example, was the service what was required, was it good enough, did it meet all objectives? Simply reporting the cost of a service does not convey information about the service itself.
Accountability in the public sector is therefore a more complicated business than simply reporting bottom line earnings. Each objective needs a means to describe it and a method to show whether it has been achieved. Such performance measures will differ from service to service: for example, what will measure the effectiveness of sewage disposal is obviously not appropriate for reporting the performance of diplomatic harvests. These measures are reported to public sector stakeholders through annual plans and service performance statements. The need for non-financial performance measures does not apply as much to profit-seeking parts of the public sector.
In the private sector, most companies are owned by individuals who have chosen to adapt this role and who will demand access to information about their investments. In the public sector, ownership is involuntary: everyone owns the public sector, whether they want it or not, and they cannot sell their property individually. This global, unselected ownership creates a greater need for accountability.
In the private sector, expenditures are made in order to generate income. For example, marketing expenses and storage costs are incurred to generate revenue. By contrast, the source of public sector revenue is largely unrelated to spending. Most of the taxes and fees collected are non-specific, not intended to pay for particular services. Other sources of income, such as rentals, sales, fees, and partial charges, may be related to the service being provided.
Due to the nature of the services provided, receipt of public sector services may be invisible, reticent, or paid for by someone else, or even by another generation. For example, the tax can be used to prevent air pollution (of which the taxpayer may be unaware), it can be used for defense, or it can be spent on hospitals (however, the taxpayer can always be healthy).
