Question

What are the differences between government and private sector accounting and finance?

Answer 1

Government Accounting

Accounting is an important function of any business. Knowing when and where your money is coming and going is crucial. Without that knowledge, it's impossible to know who or what got paid or needs to be paid. In the business world, also know as the private sector, this is pretty straight forward. In government, or the public sector, revenue streams function a little bit differently.

The majority of governmental agencies are funded at some level by funds received from various taxes or grants. Because government agencies serve as stewards of taxpayer money, using the money to provide valuable services and goods to the public, there's a need for both uniformity and transparency in the way financial data is reported. To establish uniformity in their accounting processes, government agencies follow what's referred to as generally accepted accounting principles, or GAAP for short.

These principles serve as the basis for the rules and regulations put forth to establish uniform accounting procedures in government. Having a uniform method in which financial data is reported allows agencies to show that they're functioning as good stewards of taxpayer dollars. The Government Accounting Standards Board, or GASB for short, is an independent, non-political entity that helps governments report their finances in a transparent manner by establishing and providing oversight for GAAP.

Training: Public accountants are trained to analyze accounting systems, collect evidence and test to see if a business is running effectively. A public accounting professional also must have a keen understanding of accounting standards for financial statements. Private accountants, on the other hand, are trained in the processing of a variety of accounting transactions, such as accounts payable and billings. The knowledge of private accountants may be limited to the work they are responsible for.

Experience: A public accountant may have experience in multiple industries, depending on their specific clients. A private accountant will probably have knowledge that applies to a single industry.

Certification: Public accountants will likely need certification as a CPA, while private accounting does not require certification. Several certifications are available for private accounting, however.

Career Path: The career path of a public accountant is straightforward: they will either advance through working as an auditor and audit manager to eventually holding a position as an audit partner or they will work in tax accounting. Audit partners manage audit relations and work to bring in new business, while tax accountants work with tax returns and other forms of tax record keeping. For private accounts, career paths are more likely to vary. They can begin in one of several specialty areas and then advance to an assistant controller position. Private accountants can then become controllers or chief financial officers (CFOs). CFOs are responsible for all internal accounting functions as well as treasury, risk management and investor relations.

Work Environment: Public accountants may experience a somewhat difficult work environment that involves travel, long hours and tight deadlines. The work environment for private accountants usually features no travel and a fixed work schedule and location. For these reasons, private accounting is often considered the more stable choice as far as day-to-day work goes.

Character Traits: Both types of accounting require strong social skills. A public accountant must feel comfortable interviewing clients and addressing system failures with tact. Their work often involves constructively analyzing the work of clients as well. Private accountants work with other departments within their companies and therefore must do well in team situations that require community interaction.

Job Satisfaction: Because of the difficulty that can sometimes arise from criticizing and evaluating the work of other accountants, working in the public accounting field isn’t for everyone. Job satisfaction tends to be higher in private accounting because professionals are creating business transactions and reporting on effectiveness.