Public sector governance: formula sheet

Key formulas

Value for money (the three Es)

Value for money = Economy + Efficiency + Effectiveness

Economy is spending less on inputs for the same quality. Efficiency is the best output from given inputs. Effectiveness is achieving the intended outcome. Not a numerical formula, but a framework for judging public bodies.

Core contrast

Private sector: maximise shareholder wealth | Public sector: deliver services and policy outcomes within budget

Use it as a starting point. Tailor it to the scenario because some private firms have social aims and some public bodies earn income.

Core principles of good public governance

Openness + Integrity + Accountability

The three principles most often tested. Define each and link it to the scenario.

IFAC/CIPFA overarching aim

Achieve intended outcomes while acting in the public interest at all times

Use this to frame any answer on the framework.

IFAC/CIPFA first two principles

A: Behave with integrity, demonstrate strong commitment to ethical values, respect the rule of law. B: Ensure openness and comprehensive stakeholder engagement

Remember these two as the base. The other principles cover outcomes, interventions, capacity, risk and performance, and transparency and audit.

Public sector value test

Economy, efficiency, effectiveness (value for money)

Public bodies are judged on these rather than profit. Add equity where the scenario involves fairness.

Accountability chain

Citizens → elected representatives → officials and managers

Each link must answer to the one before it. Gaps in the chain signal weak governance.

Accountability chain

Body → accounts to → government / legislature, taxpayers, citizens, regulators, auditors, funders

Use it to list who the body must answer to. Always say what each party needs to know.

Mendelow's power-interest matrix

High power + high interest = key players; high power + low interest = keep satisfied; low power + high interest = keep informed; low power + low interest = minimal effort

Use it to prioritise stakeholders. In the public sector, citizens often have high interest but low individual power, so influence may come through the media or elections.

Value for money (the 3 Es)

Economy (low cost of inputs), Efficiency (outputs per input), Effectiveness (outcomes achieved against objectives)

A common basis for public sector performance reporting and a test of accountability for spending.

Core transparency tests

Information should be timely, accurate, accessible and relevant to the user

Use these when judging whether disclosure is adequate.

Economy

Economy = cost of inputs, compared with a benchmark or budget (spending less for the same quality)

Link: inputs. Check quality is held constant, or low cost may be false economy.

Efficiency

Efficiency = outputs ÷ inputs (or cost per unit of output)

Link: inputs to outputs. Example: cost per patient treated, pupils taught per teacher.

Effectiveness

Effectiveness = extent to which outputs achieve the intended outcomes or objectives

Link: outputs to outcomes. Compare actual outcomes with the stated target.

Value for money

VfM = economy + efficiency + effectiveness (assessed together)

It is a judgement across the three, not a single number.

Nolan principles (seven principles of public life)

Selflessness, Integrity, Objectivity, Accountability, Openness, Honesty, Leadership

Use as a checklist against the behaviour in the scenario. Name the principle, then show how the facts breach or support it.

Risk response options (TARA)

Transfer, Avoid, Reduce, Accept

Pick a response that fits the body's risk appetite. Public bodies often cannot avoid a risk if the service is a legal duty.

Risk assessment

Risk priority = likelihood × impact

A qualitative ranking is enough in SBL. Use it to say which risks need action first.

Sustainable development

Meeting present needs without compromising the ability of future generations to meet their own needs

Widely used definition. Link it to economic, social and environmental dimensions (the triple bottom line).

Quick revision

• Public bodies aim at service and public benefit, not profit.
• Objectives are often multiple, vague and in conflict, so prioritisation matters.
• Governance sets who directs, controls and answers for the organisation.
• Accountability runs to the public, funders, government and regulators.
• Transparency means timely, clear and honest disclosure of decisions and results.
• Value for money means economy, efficiency and effectiveness together.
• Cheapest is not best value if outcomes are poor.
• Performance measures should link to objectives and be hard to manipulate.
• Ethics: public interest, integrity, objectivity and avoiding conflicts of interest.
• Risk includes political, reputational, funding and service-failure risk.
• Sustainability covers long-term finances, environment and community impact.
• Always apply points to the scenario and finish with a recommendation.

Common mistakes

• Saying public sector bodies have no financial objectives. Fix: Say financial discipline still matters. Budgets are fixed, funds are limited and cost control and value for money are required.
• Giving a generic list of differences that ignores the scenario. Fix: Use named facts from the case in every point, for example the actual service, funder and users.
• Treating public sector governance as the same as corporate governance. Fix: State that the owners are the public, objectives are service and value for money, and accountability runs to citizens through politicians.
• Listing principles without applying them to the scenario. Fix: Each principle needs a fact from the case and a consequence. Definition alone earns little.
• Treating the public body like a company with shareholders and profit as the main objective. Fix: Start with the public body's purpose and funding. Say it answers to taxpayers, government and citizens, and that success is judged on service outcomes and value for money.
• Giving a generic list of stakeholders with no link to the scenario. Fix: Name the specific groups in the case and state what each wants from this particular body. Marks go to application.
• Treating economy as simply spending less. Fix: Define economy as lowest cost for a given quality. Warn about false economy when quality drops.
• Confusing efficiency with effectiveness. Fix: Efficiency is outputs per input. Effectiveness is whether outputs achieve the goal. Efficient but pointless is possible.
• Treating the public body like a listed company and talking about shareholder value and profit. Fix: State the body's service objectives first. Talk about value for money, accountability to citizens and public trust.
• Listing the Nolan principles from memory without applying them. Fix: Name only the relevant principles and tie each to a fact in the case, then say what should be done.

Exam tips

• Always anchor the answer in the scenario. Name the body, the funder and the users and use their facts in each point.
• Show stakeholder power. The government as funder usually has the most power, and saying so earns analysis marks.
• Present conflicts between objectives explicitly. Examiners reward recognition that quality, access and cost pull against each other.
• Match the format the task asks for, such as a briefing note, and keep a professional tone to earn professional skills marks.
• Make a clear recommendation or conclusion. A list of differences without judgement scores poorly.
• Always tie each principle to a fact in the scenario. Professional skills marks reward analysis and application, not lists.
• Use the IFAC/CIPFA framework as a structure for recommendations, but do not invent wording. Stick to themes you know.
• When asked to compare with corporate governance, cover owners, objectives, accountability and performance measures.