Chapter 1

Introduction to Public Sector

Learning objectives

• Define public sector accounting• Identify and explain the components and features

of public sector• Explain the concept and objectives of separation

of powers• Explain the three types of powers – legislative,

executive and judiciary• Define the relationship between the Federal and

State government

Chapter overview

• Definition• Components of Public Sector• Features of Public Sector• Powers of Government• Public sector vs Private sector

Definition of Public Sector

• General– All entities related to government (G) federal, state, local

statutory bodies, nationalized industries (state-owned enterprises, public corp., public enterprises)

– Controlled by the Government• MACPA as per Accounting in Public Sector Guideline

No. 1 1990:– “To include central, state and local government, any

entities owned by the central, state or local government and any entity established under any Act of parliament, which requires the presentation of the annual financial statement to the parliament or Minister.”

Public Sector Accounting

• Focused on accounting process of public money and property

• Compulsory by laws• Definition of public money and property – Sec.3,

Financial Procedure Act 1957: “Semua pendapatan, pinjaman, amanah dan lain-lain wang dan semua bon, debentur dan lain-lain jaminan walau dengan apa cara sekalipun yang diwujudkan oleh kerajaan atau diterima masuk kedalam akaun Kerajaan Persekutuan dan Negeri, tetapi tidak termasuk Zakat, Fitrah, Bait-ul-mal atau hasil-hasil agama Islam seumpamanya”

• public money: including cash,

Components of Public Sector

Federal Government

Consists of ministries, departments and public enterprises

Ministries are the highest body in federal administrative machinery. The Secretary General is the most senior administrative officer in each ministry.

Departments carry out most functions of the ministries

Headed by Director General

Federal Government

• Public Enterprises: statutory /non-statutory body. – Statutory body: formed by Act of Parliament to

achieve specific objectives of Government– Examples: MARA University of Technology, Majlis

Amanah Rakyat (MARA)– Non-statutory Body: formed and governed by

Companies Act 1965. Purely business venture and formed for socio-political objectives.

– Examples: Perbadanan Nasional Berhad (PERNAS), MAS, Telekom

State Government

• Executive authority: Ruler / Yang Dipertuan Negeri

• The State Secretary heads administrative machinery.

• Examples: Water Supply Department and Education Department.

Local Government

• Governed by the Local Government Act 1976

• Examples of Local Government

Features of Public Sector

• Influenced by Laws and Politics• Budgetary Accounting• Fund Accounting• Vote Accounting• Coding System• Basis of Accounting• Financial Reporting• Accounting Period

Powers of Government

• Legislative powers – power to make/amend laws, to levy taxes and to sanction expenditure of public money. Parliament consist of YDP Agong & 2 house of representative (Dewan Senat & Dewan Negara)

• Executive powers – power to formulate policies, vested in YDP Agong & exerciseable by the cabinet led by PM

• Judicial powers – power to hear & determine civil & criminal matters between 2 parties & tp pronounce the legality of any legislative or executive act & procedures. Head by Chief Justice appointed by YDP Agong

PUBLIC VS PRIVATE SECTOR