The Public organization stands in marked contrast to private business. Government revenue is not expected to exceed governmental expenditure, leaving a surplus. Again only selected aspects of government activities are in the market. Significant performance cannot, therefore be judged, like in the case of private organizations, by control on all items of expense on the basis of their contributions to private gains. In public organization, everything cannot always be balanced, compared, and adjusted in a systematic fashion in money terms. The market, as a guide, and a goal of profit are not available for public organization as a discipline to actions. Public organizations conduct their affairs in terms of budget principle. Budget principle means, decisions reached through political and administrative procedures, based on common social objectivities. Activities in the public sector are conducted in three distinct forms. One of these is similar to the business firm. This is called government enterprise, and it includes the sale of electricity (where there is government control), the sale of documents, etc. In organizational characteristics, government enterprise tends to equate with private organization, except for the fact that its policy characteristics are distinct. Expenditures may not necessarily be limited by revenue. Management may or may not have surplus as the objective. The risk factor is also not present to the same degree, as government funds act as a buffer in emergencies. The second type of organizational form in the public sector is the “Trust Funds”. Trust Funds tend to be beyond the market as their revenue, may come from taxes similar to taxes imposed for financing the government. An example of this is a contributory system of social insurance. Third organizational form is the traditional activities of government conducted by departments and agencies, for such ends as protection of persons and property, defense, and for providing a judicial and legislative system as well as providing education and health services, etcetera. Here, the main distinction is that while public organization may procure the factors of production from the market in competition with private organizations, for example, business firms, it does not derive is revenue by selling goods and services. The revenue is derived through taxation and fees, which may be related to social benefits derived in on unascertainable way. The relationship between taxation and social benefits is still a much debated point. The discussion on efficiency of public and private organization brings us to an analysis of the main instrument of management – the budget. For public organization, the guiding principles are accuracy and completeness. These principles reflect the accountability to the public of the government’s spending and raising money A governmental system may survive in spite of the fact that it conducts its affairs badly. For the private organization, however, survival is the ultimate test of efficiency. In general, this is true over a period of time. There is, however, no real measure of financial efficiency of a private and public venture. Governmental operations effectiveness is conditioned by attitudes of individuals and groups affected by the public organizations they are in contact with. The public budget reflects measures to win popularity, the working of pressures groups or interest groups, legislative control, and bargaining. In formulation of the executive budget composed in the basis of agency and department budgets, there are tendencies towards “empire building” and perpetuation of obsolete or inefficient sections. In the public sphere, the budget is the tool of financial management. It is the medium through which government fiscal policy is enacted. It is also evident that the goals take into account the social texture, the political environment, and practicability in the execution of financial plans. The goals may be uneconomic, but socially and politically sound. Unity in government operations may be achieved if administrative and legislative procedures are solved. The difficulty of the task can be accessed from the understanding and knowledge of organizations involved in the formulation of the budget. The significance of planning in the public sphere arises not only from the implications of fiscal policy, but also because the private sector itself is regulated by governmental activity. Thus the nature of taxation, i.e.; proportional or progressive, and the way expenditures are made have a far – reaching influence on private organizations. Thus, private organizations, which are affected by both governmental fiscal policy as well as market conditions, have, over a period of time, come to plan activity in a way that the organizational structure can readily reorganize to adapt to new economic, political, and social environments. The degree of success it achieves depends on this factor. This implies elimination of waste, promotion of economy, rational planning of programmes, continuous reorganization to suit the economic environment, and the general internal and external environment etc. It is important to have a good idea about tools of financial management in public and private organizations. In the private organization motivated by the profit incentive, the tools are: (1) The balance sheet, i.e. the sales journal; (2) Profit and loss statements; (3) Estimating profit between statements of various dates, making adjustments possible; (4) Analysis of expenses; (5) Ratio analysis; i.e. relationship of items one to another; (6) Comparative analysis of balance sheet for several months or years to see the trend, and comparison of the balance sheet with the profit and loss statements. For public organizations the government fiscal policy is the guideline. The tools of the fiscal policy are taxation (revenue policy, in broader terms), debt policies and, expenditure programmes. The revenue resources of public organizations are assured for them. To ensure proper utilization of resources, accounting and auditing supplement the tools of the fiscal policy and its significance. The Federal Reserve structure has certain public responsibilities / functions to perform. The role of the Federal Reserve Banks is that of controllers of credit, the lender of the last resort, the banker’s bank, creation of money ete. These special functions of the Federal Reserve System make it noticeably distinct from its counterpart in the private sector – which, in fact it is supposed to guide through monetary policy measures.Accounting in governments serves yet another purpose – this is the accountability function. The “management” function involves incorporating information for planning and directing and procedures for internal audit and control operations. For public organization, the guiding principles are accuracy and completeness. These principles reflect the accountability to the public of the government’s spending and raising money. In managerial accounting, the main considerations are timeliness and relevancy of the data. The private organization’s (business, mainly) main concern is not completeness but “flash reports” and data which are relevant only in the context of its goals and objectives. Cost-accounting in commercial activities is based on assignment of cost on a unit basis of processes and goods and on timing to indicate future production and activity. It is thus a motivating factor and goal oriented. Both public and private organizations have distinct features, which both have tried to adapt to their own systems to promote efficiency and job satisfaction. The dynamic nature of the economy led large scale business enterprises to extend budgeting to include planning, coordination, and control of operations. The impression on business was obviously the result of efficacy of fiscal policy measures through its instrument – the budget. It might do well to elaborate a little on financial administration, problems of the revenue system as a whole and public credit or debt. Financial administration refers to financial management of government, including the preparation of the budget, the administering various revenue sources, the custody of public funds, procedures in spending, maintaining records etc. Formulation of budget and implementation requires skills and expert knowledge. We need experts to assist the whole process. Legislators and law-makers can benefit from new knowledge and skills in financial management of government. All decision-makers in government need sociological imagination; knowledge about economics; and financial administration. The writeris a former Director of the National Institute of Public Administration (NIPA), Government of Pakistan,a political analyst, a public policy expert and a published author. His book Post 9/11 Pakistan was published in the United States