Privatization: It's Here Locally, Nationally and Globally

By Shapiro, Leslie S. | The National Public Accountant, October 1996 | Go to article overview
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Privatization: It's Here Locally, Nationally and Globally


Shapiro, Leslie S., The National Public Accountant


In the August 1996 edition of the National Public Accountant, I wrote about privatization. I again wrote about it in last month's edition. At the risk of "overkill," I am devoting yet another article to a subject having the potential of greatly modifying the manner in which accountants deal with the government relative to their own affairs and on behalf of clients.

I recently returned from the convention of the American Legislative Exchange Council. Privatization of the work of government, particularly at the state level, was a subject the convention attendees could not escape. The prevalence of the discussions about privatization and the views of the state legislators reinforced my belief that the concept no longer is being considered as something that may occur in the distant future. It is upon us. It already has started and eventually will hit all aspects of our lives. While privatization of the work of state accountancy boards may have the most direct impact on us and clearly is that to which we must be the most sensitive, there is a movement in the United States for pervasive privatization. Further, privatization is a global occurrence. There have been major privatization accomplishments in a number of other countries. Great Britain, New Zealand and Argentina are but a few.

Privatization is a concept that transfers to the private sector functions traditionally performed by the government. There normally is some oversight by the government of those functions. Privatization in great measure is a result of the federal, state and local governments efforts to deregulate and to reduce the size and cost of government. A thoughtful paper written by GTECH Corporation on the trend toward lottery privatization pointed out four objectives of privatization:

BETTER COST MANAGEMENT

The underlying objective is that the private sector bears most, if not all, of the burden of capital outlays and other significant expenses. Together, public and private partners share in the risks and rewards of the enterprise, thereby creating an incentive to invest in the business as it grows. Private sector companies seek to invest only in projects with a demonstrable and attractive return.

INCREASED EFFICIENCIES

Efficiencies achieved by the private sector benefit the state and its citizens. For example, if a state wishes to utilize its lottery system for the delivery of other state services such as electronic benefit transfers or other forms of licensing and registration, the state can benefit from economies of scale.

ADDITIONAL PRIVATE SECTOR JOBS

Additional outsourcing results in the establishment of additional private sector jobs. The private sector takes on the responsibility for employee pensions, thereby releasing the state of a long-term financial obligation.

INCREASED REVENUE GROWTH

Private vendors must be willing to invest in the programs and resources required for revenue growth. Again, the public/private partnership provides the opportunity for shared risks and shared rewards.

The objectives delineated above contemplate "businesses" traditionally handled by government, such as the U.

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Privatization: It's Here Locally, Nationally and Globally
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