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ACCA Strategic Professional · Strategic Business Leader · Public sector governance

A national audit office reviews a state-owned water utility. It finds that the utility met all legal requirements and spent within budget, but that costs per customer were far above comparable utilities and service outcomes were declining. Using a public sector governance perspective, which conclusion is best supported?

Governance is deficient because it has concentrated on conformance and neglected performance. Public sector governance requires both compliance with law and budget and delivery of economy, efficiency, effectiveness and value for money. High unit costs and falling service outcomes show the performance dimension is not being overseen properly.

  1. AGovernance is adequate because compliance and budget control are the essence of public accountability
  2. BGovernance is deficient because the focus has been on conformance and has neglected performance and value for moneyCorrect
  3. CGovernance is deficient only if the utility is later privatised
  4. DThe findings are a management accounting matter and not a governance issue

Explanation

Public sector governance covers both conformance (legality, probity, budget control) and performance (economy, efficiency, effectiveness). The utility passes conformance but fails performance, so governance is incomplete. Option A ignores performance. Privatisation is irrelevant to the test, and performance oversight is a board responsibility, so D is wrong.

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