What are some of the differences between working in the private and public sector? Here are five key areas to keep in mind as you make the transition.
You’ve Just Left the Private Sector for a School District Job. What’s the Difference?
If you just moved from a private sector job to a position in the finance office of a public school district or charter school, you probably have plenty of questions. You may wonder, what are some of the differences between working in the private and public sector? Are there potholes to avoid? Here are five key areas to keep in mind as you make the transition.
You may associate this term with test scores, but it also describes the difference in governance structures between the public and private sector. Usually governed by an elected Board of Trustees, school districts and other public educational organizations are accountable to both the constituents they serve directly (i.e., parents and students) and taxpayers (many of whom probably don’t have students in your schools). If you work in the school business office, your superintendent is the equivalent of a CEO in the private sector. The CEO may report to a Board of Directors, but the company’s constituents are the clients and customers.
In addition, because public schools operate on public funds, all financial records must be made available to the public, and most Texas school districts even post their check registers online. Detailed data, such as credit card statements, must be shared with anyone who requests them in writing. The level of transparency is very different from the confidentiality most private companies expect for their financial records. The differences in accountability may not affect your daily work, but it is fundamental to the way the two types of organizations operate.
As a school district employee, your mission is to support the delivery of effective public education in the most cost-efficient way. Whether you work in the business office, finance, internal audit or another role, you ultimately answer to the public. Yours is a mission-driven organization. While most private sector organizations have a stated mission, their basic purpose most often focuses on the bottom line--- generating profits for stakeholders or shareholders. A school’s purpose must remain focused on the students.
Public-sector organizations, including school districts, submit annual operating budgets to the Board of Trustees in their role as fiduciaries of the organization. Once the annual budget is adopted, any significant changes must be approved by amendment and voted on in a public meeting, which can be a heavy lift. By contrast, private sector organizations typically have more leeway in changing course during the year, making adjustments as necessary. The cost drivers are also very different.
Funding Sources and Revenue Streams
A public-sector entity is primarily funded by taxes, federal and state assistance, and charges for services. These sources of income subsidize the entity’s operations to achieve a break-even point. Additionally, these sources of revenue often times come with restrictions on their use, which limits how they can be spent. Since these revenue streams, at their core, come from the general public, it makes sense that their uses are limited to providing public services. A private-sector entity’s revenue streams are much more limited and come primarily from sales to customers, other businesses and governments. These revenues are generated with the intent to exceed production and operating costs and are not restricted for future use. Private entities, by design, focus on products and services that generate the highest return for their owners. In contrast, a public school’s highest return is the best possible education for its students.
GASB vs. FASB
You are likely aware that public-sector entities apply governmental generally accepted accounting principles (GAAP) promulgated by the GASB, which differ from the accounting principles applied in the private sector, promulgated by the FASB. One of the key differences is the application of modified accrual accounting to record governmental fund activity. This method of accrual focuses on current financial resources that are available to pay for current period expenses. Unlike FASB standards, this modified approach does not take into consideration long-term assets or liabilities for reporting purposes. Presenting financial activity in this manner is very useful when making comparisons to budgeted activity. Anyone looking to cross over will definitely want to bring themselves up to speed on the nuanced accounting differences.
As you adjust to your new position, these differences will become second nature. But it is helpful to be aware of the distinctions in your early days.
You will find that each sector has its advantages. Both offer great career opportunities and chances for advancement. Your success will come down to your work ethic, abilities, perseverance, and attitude. Congratulations and best of luck in your new role.