4.4 Resultados específicos
4.4.4 Auditoría de Gestión
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3.0 MAIN CONTENT
3.1 The Meaning of Public Enterprises
Generally speaking, a public enterprise is an agency of the government through which the government manages its commercial and economic activities. According to S.S. Khera, “By state undertakings is meant the industrial, commercial and economic activity carried on by the central government or by a state government or jointly by the Central government and State and each either solely or in association with private enterprise so long as it is managed by a self-contained government”.
According to a United Nations (UN) publication, “By public enterprise is meant economic undertaking especially industrial, agricultural or commercial concerns, which are owned (wholly or in part) and controlled by the state”.
To A.H. Hanson, “Public enterprises mean state ownership and operation of industrial, agricultural, financial and commercial undertakings”.
Friedman defines public enterprise as “an institution operating a service of an economic or social character on behalf of the government, but as an independent legal entity, largely autonomous in its management, public accountability and subject to some directives by the government, equipped on the other hand with independent and separate funds of its own and the legal and commercial authorities of a commercial enterprise”.
In short, public enterprise is an activity of the government, central, state or local, involving manufacturing or production of goods. As a constituent of political and administrative structure, it possesses a sound blending of public purpose, public accountability, autonomous functioning and inherent right to manage and control the enterprise by the government.
3.2 Types of Public Enterprises
Public enterprises are divided into four types based on the ownership, namely:
central government enterprises, like the Nigerian Airways, Nigerian National Petroleum Corporation (NNPC), National Steel Company etc.
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state government enterprises like the State Transport Corporation etc.
joint enterprises of both the central and state governments;
William A. Robson divides them into seven categories on the basis of the nature of their activities. These are:
public utilities like water, electricity, gas, ports and harbours,
transport and communication like railways, airlines, shipping, telephones, posts and telegrams etc
banking, credit and insurance like the Central Bank of Nigeria, financial corporation
multipurpose projects like the Tenesse Valley Authority in USA etc.
basic industries like coal, mining, iron and steel and shipyard
new industries or services
cultural activities like the Film Corporation of Nigeria
3.3 Why Public Enterprises
Government intervention of a positive kind in the ownership, operation and regulation of public enterprises and public utility services has today become all-comprehensive and varied. These undertakings have served as a powerful instrument for achieving social and economic development. Without basic infrastructural facilities like roads, dams, railways, energy and means of communication, economic growth would not have been possible. These activities are not undertaken by the private sectors as its sole concern is profit motive. The growth of public enterprises is influenced by various factors like needs of the nation, defence considerations, political and social philosophy and the state of economic development. In Nigeria, the following reasons justify government participation in economic activities.
Need for Sound Industrial Base
Nigeria was economically backward during the colonial rule.
After independence in 1960, the task of its economic reconstruction was vast. Huge capital investment was required to build dams, provide infrastructure for industrial growth and provide public utility services to the people; that could be done by the government only.
Modern Economy is a Planned Economy
It is believed that the success of a planned economy depends on the growth of public enterprises. Planning is of particular significance for Nigeria where a lot has to be achieved with limited resources and within a limited time. Modern economy has to be a planned economy; the national responsibility of planning
63 is something which cannot be discharged by any authority other than the government. According to A.H. Hanson, “Public enterprise without a plan can achieve something; a plan without public enterprise is likely to remain on paper.”
Balanced Growth
Since the private sector does not take any interest in the establishment of industrial base including development of key and basic industries and since it has no social interest in promoting balanced regional development (It sets up industry only in such areas where it is profitable to do so), the government has to take up the task of nation-building and ensure balanced regional growth of the country by providing infrastructure and facilities in the backward regions.
Commitment to Socialist Society
The government is committed to build up a secular socialist society in Nigeria and therefore it is increasingly compelled to enter directly into industrial and commercial activities.
Need for Funds
The government needs funds for its diverse welfare activities. By active participation in business, the state can get money in the form of profits which may be used by it to discharge the new and heavier burdens of a welfare state.
Socio-Politico-Factors
A government committed to certain social and political philosophy may well decide to intervene in the economic activity.
The political philosophy of socialism may lead a country to nationalize certain enterprises such as the banks, air transport and coal mines. The social purposes may include development of weaker sections of society, development of backward areas and child and women welfare.
In a survey undertaken by the United Nations, it was found that the factors determining a government‟s attitude towards public enterprises are in part ideological and in part pragmatism.
Organisation of Public Undertakings
In general, there are three main forms of organisation of public undertakings, namely, departmental concerns, government companies and public corporations. In addition, there are other forms also which are being used for management of economic type of activities. Below, we briefly outline the characteristics of the three main forms of organisation.
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3.4 Departmental Undertakings
Department is the traditional unit of public administration. In the field of public enterprises also, it is the oldest form of organisation. An enterprise may constitute a department itself or it may be organized as an integral part of a department similar in status to a division, bureau or section within a department. In a more specific sense, departmental undertakings are a part of the governmental organisation set up as different ministries/departments subject to the control of a minister.
Thus, posts and telegraph, defence production, railways, ports, docks, mints, government printing press etc are departmental enterprises. At the state level, Diary schemes, Road transport, irrigation etc are departmental undertakings.
The Main Characteristics of Departmental Enterprises Are:
the enterprise is financed by annual appropriations from the consolidated fund and is a part of the annual budget
the enterprise is subject to the budget accounting and audit controls applicable to other departmental activities
the staff members of the enterprise are civil servants. Their service rules are guided by the civil service rules
the enterprise is subject to direct control of the head of the department. He is fully accountable, through his minister, for the activities of the enterprise
the enterprise can be sued only through the state. It is not a legal person
it is created by an executive resolution. Its creation does not require any prior approval.
Aim and Objective
In order to facilitate the working of departmental enterprises, and lend an amount of flexibility in their functioning, a Board of inter-departmental committee is sometimes set up as the Railway Board, Posts and Telegraphs Board, Defence Production Board. The main objective behind its pattern is to give the responsibility of managing departmental enterprise to a plural executive rather than a singular one so that better and objective decisions may be taken.
The Main Advantages of Departmental Enterprises
The main advantage of departmental enterprises is that, it is directly under ministerial control and accountable to the parliament.
Accountability to the parliament is its greatest advantage. Further, it follows a set of structural pattern and fixed procedure which leads to the
65 regularized arrangement of its operations. Administrative planning becomes easier. But unfortunately, the disadvantages far exceed its advantages.
Disadvantages of Departmental Enterprises
The departmental form of organisation leads to centralization of authority. For every activity or decision prior approval of the government is required. Thus, this system does not permit sufficient autonomy and flexibility so essential for the effective functioning of industrial and commercial activities. The strict and rigid financial and administrative controls make the administration of such enterprises non-flexible. By the time government approval is received, the market-situation changes.
Rules are given precedence over urgency.
It is strictly hierarchical in its structure and follows the principle of chain of command. Because of too much emphasis on hierarchical levels, the benefits and services to the consumer are adversely affected. The bureaucratic approach gives rise to red-tapism, delay and nepotism. The initiative is killed and every individual within the organisation tends to look upwards for decision.
The departmental undertakings are open to all sorts of political pressures and party interest. There is reckless expenditure in order to strengthen and stabilize the ruling party‟s position or to appease populism. There is much political interference in its day-to-day functioning. Even transfers of minor employees are dictated by the minister. The frequent changes in the ministry or change of the government does not enable the organisation to undertake a long term perspective. Often, a minister, on assuming charge of a departmental enterprise, changes its earlier projects even after much expenditure has been incurred on their implementation.
According to Earnest Benn, “the great departments of state are not organized for business administration”. As a matter of fact, the problems of flexibility and autonomy are the basic problems of departmental enterprises. Although some attempts have been made to introduce flexible procedures and give autonomy to the managements by setting up Boards, this pattern should be adopted only after a judicious consideration of the various aspects involving an activity. It should be an exception rather than the rule.
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3.5 Government Companies
Prof. A. H. Hanson in his book, entitled Public Enterprises and Economic developments has defined the term state company as „an enterprise established under the ordinary company law of the country concerned in which the government has a controlling interest through its ownership of all or some of the shares‟.
The main characteristics of a government company are as follows:
it has most of the features of a private limited company
The whole of the capital stock or 51 per cent or above is owned by the government
all the directors, or a majority of them, are appointed by the government depending to the extent to which private capital is participating in the enterprise
it is a corporate body under a general law, viz, companies act
it can sue and be sued, enter into contract, and acquire property in its own name
it is created by an executive action of the government without parliament‟s specific approval having been obtained and its articles of association, though conforming to on act, are drawn up and are revisable by the government
its funds are obtained from the government and in some cases from private shareholders, and through revenues derived from the sale of its goods and services
it is generally exempted from the personnel, budget, accounting and audit laws and procedures applicable to government departments
its employees, excluding the deputations, are not civil servants.
The government company may be wholly-owned, partially-owned and joint-sector company. A wholly-partially-owned company is one in which the entire share capital is invested by the government itself without any participation from the public. A partially-owned is one in which the government invests at least 51 per cent of the share capital, the remaining part coming from the public. A joint sector company is one in which both the public and private investments have taken place and where the state takes an active part in direction and control. It is a mixed enterprise of government and some other private entrepreneurs like Shell BP and Lever brothers. The government reserves the power to control and supervise while the private entrepreneur carries on with the work of production and management.
The Government May Adopt the Company Form of Organisation for Three Reasons:
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it may have to acquire shares of an existing enterprise in response to a financial or employment crisis or in order to maintain a nationally important production or service which has become unprofitable or insolvent under private enterprise
the state may wish to launch an enterprise in association with certain other interests, national or foreign
the government may wish to start an enterprise entirely as a public concern in order to put it on its fact, with the intention of disposing of all or part of it to the public, or to specific private interests as soon as possible.
Advantages
The Other Advantages of a Company Organisation Are:
Convenience in formation, flexibility and freedom in operation, less burden of capital on the state, cooperation from the private sector, better discipline than under a departmental organisation, professional management, suitability for commercial trading and other similar activities and opportunity to get foreign collaboration.
In view of the advantages, the company form of organisation is very popular with the government. However, it suffers from certain limitations or disadvantages.
Disadvantages of Government Company
The most conspicuous disadvantage is that it evades constitutional responsibility which a state-owned enterprise has to the parliament in a democratic country. It is created by an executive action and funds are provided from the consolidated fund without any prior parliamentary sanction and any accountability or control.
Professor Robson called it a device for avoiding public accountability and control.
Second, a government company remains under the control and influence of the minister for industries and is subject to the same political pressures, pulls and party interests as a departmental organisation. It does not enjoy any autonomy. In the words of Prof. V.V. Ramanafhan
“It is apparent an autonomous agency, but the articles of association are so framed and the boards so constituted that government influence can be easy and extensive.”
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4.0 CONCLUSION
In this unit, we have dwelt extensively on public enterprises, the meaning, concepts, types and most importantly, the why for public enterprises. It is also pertinent to remind ourselves that various public undertakings were vividly discussed especially, their merits and demerits, their limitations, etc. In the next unit, however, we shall yet again be discussing public corporation, the traditional unit of administration a publicly-owned enterprise that has been chartered under Federal, State or local law for a particular business or financial purpose.
5.0 SUMMARY
Government involvement in public enterprises and utility services has today become all encompassing and varied, serving as they do, as a powerful instrument for achieving social economic development.
However, public enterprises have both the merits and demerits; but nevertheless, the company form remains the most acceptable form of organisation of public enterprises, especially being favoured for its substantially commercial functions.
6.0 TUTOR-MARKED ASSIGNMENT
1. What is the motive behind private undertaking?2. Justify government participation in economic activities.
7.0 REFERENCES/FURTHER READING
Sachdera D. and Sogani M. (1980). Public Administration: Concepts and Application. New Delhi: Association Publishing House.
Tonwe D.A. (1998). Public Administration: An Introduction. Ibadan:
AMFITOP Books.
Vishonoo Bhagwan and Vidya Bhushan. (2006). Public Administration.
New Dellu: S. Chaud and Company Ltd.
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