I’m often asked what the difference is between financial management in the public service vis-à-vis that in the private sector. On the surface, it might seem like a simple question to respond to, since, as one would naturally assume, a financial officer operating in the public service has the added responsibility of being accountable to a broad base of taxpayers. Another obvious distinction one would draw is that in the public service, financial officers are not driven by profit. Instead, their core function is to ensure the sound management of funds allocated to their entities from state coffers.
But in an increasingly complex economic environment, where competitive forces in the private sector, locally and globally, greatly impact on the day-to-day operations of public entities, the response might not be as simple, or as easily simplified. Granted, public entities are in essence non-profit organisations, their sole focus being service delivery. However, much can be gained when private sector financial management practices are adapted to the public service and vice versa.
One example, which has become a strong motivator in my role as chief financial officer (CFO) of the National Arts Council (NAC), is the professionalisation of the finance team to fulfil best practice requirements in terms of qualifications and appropriate experience. This professionalisation process firstly entails gauging the latest trends in the accounting and financial management spheres and responding effectively to allow staff to position themselves accordingly. Secondly, part of professionalising staff would be to encourage them to become members of professional bodies such as the South African Institute of Professional Accountants. Such membership, of course, would have certain requirements, which staff would then strive towards fulfilling.
Lastly, a professionalised staff complement would naturally become more attuned with norms, standards and changes in corporate governance. This is especially relevant at present, with the next iteration of the ground-breaking King Report on Corporate Governance for South African Businesses (King IV). With this, we get a clear sense of the extent to which the finance team ought to be integrated into the organisation, specifically, and into the broader economy.
So instead of trying to find differences between financial management in the public and private sectors, it might be worthwhile to employ a new way of thinking to find feasible and prudent similarities. Herein lies convergence between the two spheres, where financial officers in the public service have a broader and more inclusive role to play than what they’ve traditionally come to understand. Rather than being the passive “processors” of organisational financial information, the challenging economic times have necessitated more agile and active public service financial officers who serve as enablers of sound business strategies and processes.
In this sense, as in the more “cut-throat” private sector, public service financial officers need to build greater efficiencies within their respective organisations – whether by means of effective oversight and involvement in the roll-out of infrastructure projects, or in terms of being integral to operational processes, the latter being of critical importance when identifying bottlenecks in business processes to effectively engage and manage them. This is particularly crucial in an organisation such as the NAC, where grant disbursement is at the forefront of the entity’s mandate, with the quality of internal operations having direct bearing on whether it delivers services effectively.
Hence, it becomes essential for financial management officers in the public service to adopt an approach whereby efficient business processes, and the identification thereof, become central to their day-to-day activities. This, in turn, speaks directly to accountability, something that we can all agree is of vital importance in the South African public service at present.
Taking these factors into consideration, especially when looking at financial management with a less polarised view in terms of “public” and private”, we can see that there is indeed space for entrepreneurship in government departments and public entities. It then becomes incumbent on public service financial management officers to drive this entrepreneurial spirit with the view of delivering essential services efficiently, within mandated parameters and guided by principles of accountability.