INTRODUCTION TO

PUBLIC SECTOR

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 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.

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INTRODUCTION • All organizations which are not privately
TO PUBLIC owned & operated, but which are created,
SECTOR managed & financed by the Government
on behalf of the public. (IFAC, 2012)
• “…as any entities owned by the central,
DEFINE PUBLIC state or local government & any entity
established under any Act of Parliament,
SECTOR (PS) 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).

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INTRODUCTION
TO PUBLIC
SECTOR • Public sector exhibit a variety
of social, economic, political &
IDENTIFY & legal characteristics.
EXPLAIN THE • Different power &
FEATURES OF responsibility.
PUBLIC SECTOR
• Different patterns of
accountability & objectives.
• Financed in different way &
have different organizational
structure.

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 FEATURES PUBLIC PRIVATE
SECTOR SECTOR
INTRODUCTION
Stakeholder Institutional Individual
TO PUBLIC
Framework Public International
SECTOR authorization & standard
control
(Parliament)
IDENTIFY &
Plurality of Base of Market related
EXPLAIN THE objectives perceived need demand
FEATURES OF Benefit of No direct benefit Direct benefit
PUBLIC SECTOR contributors receive receive
Accounting Fund accounting Entity accounting
principles
Control Political Financial
Resources Taxation & Loan &
collection shareholder
capital
Performance Ability to provide Profit generate
indicators the services &
good to public
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INTRODUCTION
TO PUBLIC
SECTOR
IDENTIFY & 1. Federal Government
EXPLAIN 2. State Government
COMPONENTS OF
PUBLIC SECTOR
3. Local Government
4. Public Enterprises

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INTRODUCTION
TO PUBLIC
SECTOR 1. Federal Government
– The highest tier of government.
IDENTIFY & – Comprises of ministries,
EXPLAIN departments, units & public
enterprises.
COMPONENTS OF – Has authority over external
PUBLIC SECTOR 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.

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 MINISTRY DEPARTMENT STATUTORY
BODIES
INTRODUCTION Ministry of • National Space Malaysian
TO PUBLIC Science, Agency; Technology
Technology & • Atomic Energy Development
SECTOR Innovation Licensing Board; Corporation
• Malaysian Centre (MTDC).
for Remote
IDENTIFY & Sensing
EXPLAIN (MACRES).
COMPONENTS OF Ministry of • School Dewan Bahasa &
PUBLIC SECTOR – Education Department; Pustaka (DBP).
• Private Education
Federal Department;
Government • Technical
Education
(Example) Department.

Ministry of • Road Transport Keretapi Tanah

Transport Department; Melay Berhad
• Marine (KTMB).
Department of
Peninsular
Malaysia. 8
INTRODUCTION 2. State Government
TO PUBLIC – The second tier of government.
– Limited autonomy power & operates
SECTOR at State level.
– Comprises of ministries (for Sabah &
IDENTIFY & Sarawak only), departments & public
enterprises.
EXPLAIN – The executive authority is the ruler or
COMPONENTS OF Yang Di Pertuan Negeri;
– assisted by State Executive Council
PUBLIC SECTOR (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).
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INTRODUCTION
TO PUBLIC 3. Local Government
SECTOR – The third tier of government.
– Governed by the Local Government
IDENTIFY & Act 1976.
EXPLAIN – Limited autonomy power.
COMPONENTS OF – Any city Council, Municipal Council
or District Council (Section 2, Local
PUBLIC SECTOR Government Act 1976).
– Consist of Mayor or President & 8-
24 other Councilors to be appointed
by the State Authority.

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INTRODUCTION
TO PUBLIC
SECTOR
State City Municipal District
IDENTIFY & Council Council Council
EXPLAIN Johor City • Municipal • Labis
COMPONENTS Council council of District
of Johor Johor Bahru Council
OF PUBLIC Bahru Tengah • Kota
SECTOR • Municipal Tinggi
Council of Council
Local Kulai
Government Kedah - • Municipal • Baling
(Example) Council of District
Alor Setar Council
• Municipal • Pendang
Council of District
Kulim Council
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INTRODUCTION
TO PUBLIC 4. Public Enterprises
SECTOR – Comprises of Statutory Bodies &
Government Link Companies
(GLCs).
IDENTIFY &
– statutory bodies are organizations
EXPLAIN set up under Statutory Bodies Act
COMPONENTS OF 1980 & under the responsibility of
PUBLIC SECTOR ministry.
– Objective of implementing specific
duties & responsibilities in line with
the national objective.
– Examples of statutory bodies: USM,
UUM, MARDI etc.

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INTRODUCTION
TO PUBLIC 4. Public Enterprises (cont.d)
SECTOR – GLCs are companies incorporated
under the Companies Act 1965.
IDENTIFY & – Has a primary commercial objective
& in which the Government has a
EXPLAIN direct controlling stake (appoint
COMPONENTS OF BOD members, make major
PUBLIC SECTOR decisions etc).
– Examples of GLCs:

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INTRODUCTION
TO PUBLIC
SECTOR • To enable a conducive & vibrant
economic environment.
ROLES OF • To facilitate growth &
PUBLIC SECTOR competitiveness of the industry &
private sector.
• To support the country manpower
needs;
• To enhance the quality of life of
Malaysian’s citizens.

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INTRODUCTION • A system by which financial management
TO PUBLIC resources are planned, directed &
controlled to enable & influence the
SECTOR efficient & effective delivery of public
service goals. (CIPFA, 2012)
PUBLIC SECTOR • Stated in the Constitution (under Part VII:
FINANCIAL Financial Provisions).
MANAGEMENT • Includes:
ACTIVITIES a) Budgeting activities
b) Financial accounting activities
c) Reporting
d) Auditing

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INTRODUCTION
• An accounting method practiced by non-
TO PUBLIC profit entities in public sector.
SECTOR • The main aim/ purpose is to fulfill the legal
requirement & establish a system for good
DESCRIBE public governance in managing public
PUBLIC SECTOR money (public accountability).
ACCOUNTING • Accountability- responsibility, answerability
& liability to give explanation & evidence of
their task.
• Accountability in the public sector-
obligation for Gov. employees & leaders to
answer & take action for responsibility that
has been given or entrusted by public.

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INTRODUCTION
• It can be a tool checking & making sure
TO PUBLIC that the public interest is maximized & not
SECTOR being undermined .
• In Malaysian Public Sector comprises of 3
DESCRIBE major components/ characteristics:
PUBLIC SECTOR a) Maintenance of books & records
ACCOUNTING b) Compliance with rules & regulations
c) Preparation of reports & statements

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

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INTRODUCTION • BUDGETARY ACCOUNTING
TO PUBLIC – PSO keep & present their operating
accounts in the same format &
SECTOR alongside their budget.
– Purpose: to emphasize the budget’s
DESCRIBE PUBLIC role in the cycle of planning-control-
accountability.
SECTOR – To enable verification of the
ACCOUNTING observance by Government of the
budgetary authorizations granted by
Parliament.
a) MAINTENANCE
OF BOOKS & • FUND ACCOUNTING
RECORDS – PS accounting system organized &
operated on a fund basis.

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INTRODUCTION • To ensure a true & fair view of the
TO PUBLIC prepared public accounts.
SECTOR • All public sector in Malaysia are
required to comply with rules &
regulations set by:
DESCRIBE PUBLIC
 The Federal Constitution,
SECTOR
 The Financial Procedure Act
ACCOUNTING
1957
 The Audit Act 1957
b) COMPLIANCE  Treasury Instructions &
WITH RULES &  Treasury circulars
REGULATIONS

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INTRODUCTION • Most Public Sectors’ reports &
statements must be presented in
TO PUBLIC Parliament for approval
SECTOR • Article 99 of the Federal Constitution
requires the submission of Statements Of
Assets & Liabilities to Parliament for
DESCRIBE approval, at the end of a complete
PUBLIC SECTOR financial year
ACCOUNTING • Section 16 of the Financial Procedure Act
1957 requires all government agencies to
prepare Annual Statements to be
c) PREPARATION presented to the Legislative Assembly
(Parliament)
OF REPORTS &
• Annual Statements comprise of
STATEMENTS  Consolidated Revenue Accounts
 Consolidated Loan Account
 Consolidated Trust Account
 Statement of Assets & Liabilities
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INTRODUCTION
TO PUBLIC
SECTOR

DESCRIBE PUBLIC
SECTOR
ACCOUNTING

THE BASIC
ACCOUNTING
PRACTICES IN
MALAYSIAN
PUBLIC SECTOR

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INTRODUCTION • Main purpose is to provide an efficient &
TO PUBLIC effective mechanisms to ensure the public
resources can be used & managed
SECTOR properly & objectives achieved.
• 3 broad levels:
MANAGEMENT
a) Policy-maker (pre-implementation)
MECHANISMS
b) Implementation
OF THE
c) Post-implementation
MALAYSIAN
GOVERNMENT

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INTRODUCTION
TO PUBLIC a) Management Mechanism at
SECTOR Policy Level
– Refers to the management
MANAGEMENT mechanism at the Parliament
(legislature) where all the policies
MECHANISMS OF regarding financial mgmt. are set up
THE MALAYSIAN through budget (annual
GOVERNMENT appropriations).
– No expenditure may be incurred
without Parliamentary approval.
– Once approved, becomes law
(supply act).
– “vote on account”
– “vote on credit”

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INTRODUCTION
TO PUBLIC b) Management Mechanism at
SECTOR Implementation Level
– Refers to the management
MANAGEMENT mechanism at the ministries,
departments & agencies.
MECHANISMS OF
– Accounting officer:
THE MALAYSIAN
• Public officer dealing with public
GOVERNMENT money or stores (Sec. 3 Financial
Procedure Act 1957).
• Must comply with financial &
accounting procedures by Federal
Treasury & held accountable for
actions.

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INTRODUCTION
TO PUBLIC
SECTOR – Controlling officer:
• Accounting officer in charge of
expenditure.
MANAGEMENT • Appointed by the Minister of
MECHANISMS OF Finance.
THE MALAYSIAN • Usually the head of dept.
GOVERNMENT • Estimates how much is required to
carry out departmental polices
effectively & identify necessary
funding.

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INTRODUCTION
TO PUBLIC c) Management Mechanism at
SECTOR Post-Implementation Level
– Refers to the management
MANAGEMENT mechanism at the Auditor General
Office (AGO) & other watchdog
MECHANISMS OF agencies such as Malaysian Anti-
THE MALAYSIAN Corruption Commission (MACC),
GOVERMENT 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.

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INTRODUCTION
TO PUBLIC
SECTOR –ONLY reports on deficiencies in
budget implementation, improper
payments & authorization,
MANAGEMENT
inadequate or poor record
MECHANISMS OF keeping & weak systems &
THE MALAYSIAN controls.
GOVERMENT –Monitoring of information &
achievement of plan objectives:
responsibility of controlling
officers & central agencies.

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 ITEMS PUBLIC PRIVATE
INTRODUCTION Purpose & • Compliance & Financial performance &
TO PUBLIC objective accountability to the accountable to the
public. shareholders.
SECTOR Accounting • 1st January – 31st According to the year of
year end December incorporation
DIFFERENCE Accounting • Cash/ accrual/ Accrual/ cash
basis modified cash-basis
BETWEEN
Budget • Mandatory Voluntary
PUBLIC & preparation
PRIVATE Coding • Standardize & Varies, subject to entity.
SECTOR system specific for all
agencies.
ACOUNTING • •
Financial Statement of Statement of financial
statements financial position position
• Statement of • Statement of financial
financial performance
performance • Statement of cash
• Statement of cash flow
receipts & payments • Statement of changes
• Statement of in equity
memorandum acc. • Notes to the acc.
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• Notes to the acc.