INTRODUCTION TO PUBLIC

SECTOR

OBJECTIVE OF CHAPTER 1
INTRODUCTION TO PUBLIC
SECTOR
1. Define public sector.
2. Identify & explain the features of public sector.
3. Identify & explain components of public
sector.
4. Describe public sector accounting.

INTRODUCTION
TO PUBLIC
SECTOR
DEFINE PUBLIC
SECTOR (PS)

All organizations which are not privately

owned & operated, but which are created,
managed & financed by the Government
on behalf of the public. (IFAC, 2012)
as any entities owned by the central,
state or local government & any entity
established under any Act of Parliament,
which requires the presentation of the
annual financial statements to the
Parliament. (MICPA as per Public sector
Guideline No.1 1990).
.as a device for regulating human
services so that men & women can live
together
in
reasonable
harmony.
(Derbyshire 1987).

INTRODUCTION
TO PUBLIC
Public sector exhibit a variety
SECTOR
IDENTIFY &
EXPLAIN THE
FEATURES OF
PUBLIC SECTOR

of social, economic, political &

legal characteristics.
Different power &
responsibility.
Different patterns of
accountability & objectives.
Financed in different way &
have different organizational
structure.

INTRODUCTIO
N TO PUBLIC
SECTOR
IDENTIFY &
EXPLAIN THE
FEATURES OF
PUBLIC SECTOR

FEATURES

PUBLIC
SECTOR

PRIVATE
SECTOR

Stakeholder

Institutional

Individual

Framework

Public
authorization &
control
(Parliament)

International
standard

Plurality of
objectives

Base of
perceived need

Market related
demand

Benefit of
contributors

No direct benefit
receive

Direct benefit
receive

Accounting
principles

Fund accounting

Entity accounting

Control

Political

Financial

Resources

Taxation &
collection

Loan &
shareholder
capital

Performance
indicators

Ability to provide
the services &
good to public

Profit generate

INTRODUCTIO
N TO PUBLIC
SECTOR
IDENTIFY &
EXPLAIN
COMPONENTS OF
PUBLIC SECTOR

1.
2.
3.
4.

Federal Government
State Government
Local Government
Public Enterprises

INTRODUCTIO
N TO PUBLIC
SECTOR
1. Federal Government
IDENTIFY &
EXPLAIN
COMPONENTS OF
PUBLIC SECTOR

The highest tier of government.

Comprises of ministries,
departments, units & public
enterprises.
Has authority over external affair,
defense, internal security,
administration of justice, federal
citizenship, finance, trade,
shipping, communication,
transportation, education &
others as stated in the 9th
Schedule (list 1) of Federal
Constitution.
7

MINISTRY

INTRODUCTION Ministry of
Science,
TO PUBLIC
Technology &
SECTOR
Innovation
IDENTIFY &
EXPLAIN
COMPONENTS OF
PUBLIC SECTOR
Federal
Government
(Example)

Ministry of
Education

DEPARTMENT

STATUTORY
BODIES

National Space
Agency;
Atomic Energy
Licensing Board;
Malaysian Centre
for Remote
Sensing
(MACRES).

Malaysian
Technology
Development
Corporation
(MTDC).

School
Department;
Private Education
Department;
Technical
Education
Department.

Dewan Bahasa &

Pustaka (DBP).

Road Transport
Department;
Marine
Department of
Peninsular
Malaysia.

Keretapi Tanah
Melay Berhad
(KTMB).

Ministry of
Transport

INTRODUCTIO
N TO PUBLIC
SECTOR
IDENTIFY &
EXPLAIN
COMPONENTS OF
PUBLIC SECTOR

2. State Government
The second tier of government.
Limited autonomy power & operates
at State level.
Comprises of ministries (for Sabah &
Sarawak only), departments & public
enterprises.
The executive authority is the ruler or
Yang Di Pertuan Negeri;
assisted by State Executive Council
(headed by the Chief Minister or the
Menteri Besar).
The administrative machinery headed
by the State Secretary.
Example of state departments: State
Religious Department, State
Development Office & Public Work
Division.
Example of statutory bodies: State
Sport Council (MSN), State Economic
Development Corporation (SEDC).
9

INTRODUCTIO
N TO PUBLIC
SECTOR
IDENTIFY &
EXPLAIN
COMPONENTS OF
PUBLIC SECTOR

3. Local Government
The third tier of government.
Governed by the Local Government
Act 1976.
Limited autonomy power.
Any city Council, Municipal Council
or District Council (Section 2, Local
Government Act 1976).
Consist of Mayor or President & 824 other Councilors to be appointed
by the State Authority.

10

INTRODUCTIO
N TO PUBLIC
SECTOR
IDENTIFY &
EXPLAIN
COMPONENTS
OF PUBLIC
SECTOR
Local
Government
(Example)

State

City
Council

Municipal
Council

District
Council

Johor

City
Council
of Johor
Bahru

Municipal
council of
Johor Bahru
Tengah
Municipal
Council of
Kulai

Labis
District
Council
Kota
Tinggi
Council

Kedah

Municipal
Council of
Alor Setar
Municipal
Council of
Kulim

Baling
District
Council
Pendang
District
Council
11

INTRODUCTIO
N TO PUBLIC
SECTOR
IDENTIFY &
EXPLAIN
COMPONENTS OF
PUBLIC SECTOR

4. Public Enterprises
Comprises of Statutory Bodies &
Government Link Companies
(GLCs).
statutory bodies are organizations
set up under Statutory Bodies Act
1980 & under the responsibility of
ministry.
Objective of implementing specific
duties & responsibilities in line with
the national objective.
Examples of statutory bodies: USM,
UUM, MARDI etc.

12

INTRODUCTIO
N TO PUBLIC
SECTOR
IDENTIFY &
EXPLAIN
COMPONENTS OF
PUBLIC SECTOR

4. Public Enterprises (cont.d)

GLCs are companies incorporated
under the Companies Act 1965.
Has a primary commercial objective
& in which the Government has a
direct controlling stake (appoint
BOD members, make major
decisions etc).
Examples of GLCs:

13

INTRODUCTION
TO PUBLIC
To enable a conducive & vibrant
SECTOR
ROLES OF
PUBLIC SECTOR

economic environment.
To facilitate growth &
competitiveness of the industry &
private sector.
To support the country manpower
needs;
To enhance the quality of life of
Malaysians citizens.

14

INTRODUCTION
TO PUBLIC
SECTOR
PUBLIC SECTOR
FINANCIAL
MANAGEMENT
ACTIVITIES

A system by which financial management

resources are planned, directed &
controlled to enable & influence the
efficient & effective delivery of public
service goals. (CIPFA, 2012)
Stated in the Constitution (under Part VII:
Financial Provisions).
Includes:
a) Budgeting activities
b) Financial accounting activities
c) Reporting
d) Auditing

15

INTRODUCTION

TO PUBLIC
SECTOR

DESCRIBE
PUBLIC SECTOR
ACCOUNTING

An accounting method practiced by nonprofit entities in public sector.

The main aim/ purpose is to fulfill the legal
requirement & establish a system for good
public governance in managing public
money (public accountability).
Accountability- responsibility, answerability
& liability to give explanation & evidence of
their task.
Accountability in the public sectorobligation for Gov. employees & leaders to
answer & take action for responsibility that
has been given or entrusted by public.

16

INTRODUCTION

TO PUBLIC
SECTOR
DESCRIBE
PUBLIC SECTOR
ACCOUNTING

It can be a tool checking & making sure

that the public interest is maximized & not
being undermined .
In Malaysian Public Sector comprises of 3
major components/ characteristics:
a) Maintenance of books & records
b) Compliance with rules & regulations
c) Preparation of reports & statements

17

INTRODUCTIO
N TO PUBLIC
SECTOR
DESCRIBE PUBLIC
SECTOR
ACCOUNTING
a) MAINTENANCE
OF BOOKS &
RECORDS

Various books & records used by

public sector to account financial
activities.
VOTE BOOK/ ACCOUNTING:
Defines as a financial record that must
be kept by the government agencies
for recording expenditure, liabilities &
changes in the budget (Provision in
the Treasury Instructions No. 95).
Purpose used to control & to ensure
the expenditure & liabilities are not
more than the approved budget & also
as medium of information to produce
reports related to expenditure,
liabilities & budget balance.

18

INTRODUCTIO
N TO PUBLIC
SECTOR

PSO keep & present their operating

accounts in the same format &
alongside their budget.
Purpose: to emphasize the budgets
role in the cycle of planning-controlaccountability.
To enable verification of the
observance by Government of the
budgetary authorizations granted by
Parliament.

DESCRIBE PUBLIC
SECTOR
ACCOUNTING
a) MAINTENANCE
OF BOOKS &
RECORDS

BUDGETARY ACCOUNTING

FUND ACCOUNTING
PS accounting system organized &
operated on a fund basis.

19

INTRODUCTION
TO PUBLIC
SECTOR
DESCRIBE PUBLIC
SECTOR
ACCOUNTING
b) COMPLIANCE
WITH RULES &
REGULATIONS

To ensure a true & fair view of the

prepared public accounts.
All public sector in Malaysia are
required to comply with rules &
regulations set by:
The Federal Constitution,
The Financial Procedure Act
1957
The Audit Act 1957
Treasury Instructions &
Treasury circulars

20

INTRODUCTIO
N TO PUBLIC
SECTOR
DESCRIBE
PUBLIC SECTOR
ACCOUNTING
c) PREPARATION
OF REPORTS &
STATEMENTS

Most Public Sectors reports &

statements must be presented in
Parliament for approval
Article 99 of the Federal Constitution
requires the submission of Statements Of
Assets & Liabilities to Parliament for
approval, at the end of a complete
financial year
Section 16 of the Financial Procedure Act
1957 requires all government agencies to
prepare Annual Statements to be
presented to the Legislative Assembly
(Parliament)
Annual Statements comprise of
Consolidated Revenue Accounts
Consolidated Loan Account
Consolidated Trust Account
Statement of Assets & Liabilities
21

INTRODUCTIO
N TO PUBLIC
SECTOR
DESCRIBE PUBLIC
SECTOR
ACCOUNTING
THE BASIC
ACCOUNTING
PRACTICES IN
MALAYSIAN
PUBLIC SECTOR

22

INTRODUCTION
TO PUBLIC
SECTOR
MANAGEMENT
MECHANISMS
OF THE
MALAYSIAN
GOVERNMENT

Main purpose is to provide an efficient &

effective mechanisms to ensure the public
resources can be used & managed
properly & objectives achieved.
3 broad levels:
a) Policy-maker (pre-implementation)
b) Implementation
c) Post-implementation

23

INTRODUCTIO
N TO PUBLIC a) Management Mechanism at
Policy Level
SECTOR
MANAGEMENT
MECHANISMS OF
THE MALAYSIAN
GOVERNMENT

Refers to the management

mechanism at the Parliament
(legislature) where all the policies
regarding financial mgmt. are set up
through budget (annual
appropriations).
No expenditure may be incurred
without Parliamentary approval.
Once approved, becomes law
(supply act).
vote on account
vote on credit
24

INTRODUCTIO
N TO PUBLIC b) Management Mechanism at
Implementation Level
SECTOR
MANAGEMENT
MECHANISMS OF
THE MALAYSIAN
GOVERNMENT

Refers to the management

mechanism at the ministries,
departments & agencies.
Accounting officer:

Public officer dealing with public

money or stores (Sec. 3 Financial
Procedure Act 1957).
Must comply with financial &
accounting procedures by Federal
Treasury & held accountable for
actions.

25

INTRODUCTIO
N TO PUBLIC
SECTOR
MANAGEMENT
MECHANISMS OF
THE MALAYSIAN
GOVERNMENT

Controlling officer:
Accounting officer in charge of
expenditure.
Appointed by the Minister of
Finance.
Usually the head of dept.
Estimates how much is required to
carry out departmental polices
effectively & identify necessary
funding.

26

INTRODUCTIO
N TO PUBLIC c) Management Mechanism at
Post-Implementation Level
SECTOR
MANAGEMENT
MECHANISMS OF
THE MALAYSIAN
GOVERMENT

Refers to the management

mechanism at the Auditor General
Office (AGO) & other watchdog
agencies such as Malaysian AntiCorruption Commission (MACC),
Malaysian Institute of Integrity (MII)
etc.
AGO has NO direct responsibility for
monitoring the performance of the
budget, physical progress of
projects or existing management
information syst.

27

INTRODUCTIO
N TO PUBLIC
SECTOR
MANAGEMENT
MECHANISMS OF
THE MALAYSIAN
GOVERMENT

ONLY reports on deficiencies in

budget implementation, improper
payments & authorization,
inadequate or poor record
keeping & weak systems &
controls.
Monitoring of information &
achievement of plan objectives:
responsibility of controlling
officers & central agencies.

28

ITEMS

INTRODUCTION Purpose &

objective
TO PUBLIC
SECTOR
Accounting

PUBLIC

Compliance &
accountability to the
public.

Financial performance &

accountable to the
shareholders.

1st January 31st

December

According to the year of

incorporation

Accounting
basis

Cash/ accrual/
modified cash-basis

Accrual/ cash

Budget
preparation

Mandatory

Voluntary

Coding
system

Standardize &
specific for all
agencies.

Varies, subject to entity.

Financial
statements

Statement of
financial position
Statement of
financial
performance
Statement of cash
receipts & payments
Statement of
memorandum acc.
Notes to the acc.

year end

DIFFERENCE
BETWEEN
PUBLIC &
PRIVATE
SECTOR
ACOUNTING

PRIVATE

Statement of financial
position
Statement of financial
performance
Statement of cash
flow
Statement of changes
in equity
Notes to the acc.
29