Private vs. Public Budgets

Budgeting is an important concept that is pertinent to any organization. According to Menifield (2009), budgeting is a financial planning function that creates accountability for the funds made available to meet or work towards some goal. In the private sector, budgets create the bottom line, or the amount needed to earn making a profit. In the public sector, however, budgets reflect the accountability and stewardship of tax revenue and its application towards maintaining and improving infrastructure. Although Menifield focuses on public budgets and compares them to private-for-profit business models, many not-for-profit corporations and other philanthropic ventures use budgets to account for funding and spending without focusing so much on profit, much like public budgets (Maddox, 1999). Not-for-profit corporations still need to focus on maximizing funding and reinvesting gains, though — a difference of public budgeting (Maddox, 1999; Penner, 2004). Most important, a budget provides a sense of direction for the organization and should reflect the stated vision and values.

Menifield (2009) describes the primary difference of public versus private budgeting as public budgets are prepared based on organizational needs and the funding for the budget is directed through tax revenue. Private organizations, according to Menifield, do not have the luxury of compulsory funding enjoyed by public organizations and must generate revenue through a prospective business model that maximizes income while minimizing expenditures. Both types of budgeting have intrisic responsibilities inherent to the process, which, if ignored, could result in severe penalties to those responsible.

Additionally, there are functions of government which are served by private contractors. Employing this concept would be rationalized, planned, and tracked by utilizing both private and public budgets — the contractor would utilize an internal budget reflective of private organizations, and the contracting governmental entity would use its public budget to plan and track the contract. Whereas typical criminal justice agencies, such as local police departments, judicial systems, et al., rely on public budgeting, the recent use of private contractors to manage some federal prisons reflect this use of private-public budgeting (Austin & Coventry, 2001; Nelson, 2005).

Budgeting is a form of financial planning. A budget also serves as an important document that can be used to focus an organization towards specific goals and provides overall accountability in financial management.


Austin, J., Coventry, G. (2001). Emerging issues on privatized prisons (NCJ No. 181249). Retrieved from

Maddox, D. C. (1999). Budgeting for not-for-profit organizations. Retrieved from

Menifield, C. E. (2009). The basics of public budgeting and financial management. Lanham, MD: University Press of America.

Nelson, J. (2005). Competition in corrections: Comparing public and private sector operations (IPR No. 11647 [Revised]). Retrieved from