ACW 420 - TOPIC 1 public sector

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TOPIC 1

INTRODUCTION TO PUBLIC SECTOR

ACCOUNTING

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TOPIC OUTLINES

Introduction

Definition of terminology

The differences between Public

Sector accounting and Private Sectoraccounting

Roles and importance of publicsector

Objectives of Public Sector

Accounting Characteristic of Public Sector

Accounting

Components of public sector

Management mechanism of the

Malaysian government Roles of public sector accountants

The users and uses of FinancialReport

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Introduction PSA deal with the financial

management activities thatrequires and outlines by the FederalConstitution 1957.

The financial activities comprise ofBudgeting, Financial accounting,reporting and auditing

All these aspect will discuss

thoroughly in the specific topic ofthis course.

Coverage of PSFM

-Budgeting

-Accounting

-Reporting

-Auditing

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Definition of Terminology

Public SectorA political organization set up with power to direct, regulateand control mens activities to enable them to live togetherharmoniously and constructively and to solve their commonproblems.

Also Known as a government sector

Federal Government

Government that operate at federal level andconsists of Ministries, Departments & Publicenterprises

State Government:

Government that have a limited autonomypower and operate at state level and consist of

Departments & public enterprises Local Government:

Government that have a limited autonomypower and consist of departments only

Federal Statutory Bodies

The organization that set up through their own

act and under the responsibilities of ministries State Statutory Bodies

Government Link Companies (GLCs)

1. Public Sector

2. Federal Government

3. State Government

4. Local Government

5. Federal Statutory Bodies

6. State Statutory Bodies7. Government Link Companies

8. Fund Accounting

9. Vot Accounting

10. Budgetary Accounting

11. Commitment basis

12. Cash basis

13. Accrual basis

14. Modified cash basis

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Public Sector Accounting

a system of identifying,classifying, recording,summarizing, analyzing &

reporting of financial data &information of organization inaccordance with acceptedprinciples, concepts,conventions, standards &regulations.

Thus PSA is not different with

private sector accountingexcept for the compliance ofthe regulation.

Main differences with CA:-Requirements

-Accounting standard

-Purposes

-Operationalize

-Reports/statements

-Users of information

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Features of Public Sector

No individual shares ofownership

Operate within aframework of publicauthorization and control

Plurality of objectives

Contributors of resourcesreceive no direct interest

Varying accountingprinciples and practices

5 main features of PSFM:-Ownership

- Operational Framework

-Objectives

-Contributors interest

-Plurality in principles & practized

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The roles of Public Sector

To enable a conducive and

vibrant economic

environment To facilitate growth and

competitiveness of the

industry and the PrivateSector

To support the country

manpower needs; and To enhance the quality of life

of Malaysian citizens.

4 mains roles:-Provide conducive economic

-Facilitate growth

-Supports manpower

-Enhance quality life

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Purposes of PSA To fulfill the legal requirement

exmples. Article 97104 FC, FPA,

AA, etc.

To achieve public Financial

management accountability

Financial (fiscal), management &

programmed

2 mains purposes:

-Legality

-Accountability

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Objectives of Public Sector

Accounting To provide information necessary for

efficient, effective and economicalmanagement

an operation and of the resourcesentrusted to it

To provide information to enablemanagers

- to report on the discharge of theirresponsibilities

- to permit all public officials toreport on the on the result ofgovernment operations and the useof public funds (accountability)

Relation with the

purpose No. 2:

Accountability

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Characteristic of Public Sector

Accounting PSA will emphasis on:

Maintenance of books and allrecords properly.

Compliance with the relatedlaws, rules and regulations.

Provides a comprehensive and

accurate reports Thus, accounting in public

sector look at both themoney and public property

to account for as required bythe Section 3, FinancialProcedure Act 1957.

6 Main Characteristics:1. Compliance with the

requirements

2. Budgetary Accounting

3. Fund Accounting

4. Vot accounting5. Accounting basis

6. Coding system

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Characteristic of Public

Sector Accounting .. cont

Budgetary Accounting

The budget serves as a masterblueprint for planning, control,

and evaluation of governmental,proprietary, and fiduciary fundfinancial positions.

Method

The approved amount will becredited to an appropriationaccount and after actualexpenditures, the account will

be debited. The balance in theaccounts will show theapproved amount which not yetspend

5 characteristic:Budgetary accounting

Fund Accounting

Vot accounting

Standardize and specific coding

Accounting basis



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Fund Accounting

Fund Accounting- is an accountingsystem in which an entitys

resources are divided among two ormore accounting entities known asfunds (Granof, 1998) .

Fund- a fiscal and accounting entitywith self-balancing set of account

for resources, and claim againstthem, that are segregated in accordwith legal or contractualrestrictions or to carry out specificactivities.

Fund accounting equation:

Asset = Liabilities + Fundbalance

Fund accounting equation:

Asset = Liabilities + Fund balance

Equity accounting equation:

Assets = Liabilities + Equities



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Vot accounting

All the expenditure and

allocation need to berecorded in the vot book

before payment has been

made. Coding system

All the government entities

need to practised thestandardised coding system

provides by the Treasury

Vot accounting

-Part of the budgeting

-Link between budget &

accounting activities

-Applied commitmentaccounting basis

Coding system

- Standard and

comprehensive Code

developed by the treasury

and compulsory for all level of

the government agencies



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Sector Accounting .. cont Accounting basis

Government entitiespracticed 4 types of

accounting basis depend

on the nature of thatentity:

Commitment

Accrual Cash

Basis in recognized the

transactions;

-Cash

-Accruals-Modified cash

-Commitment



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Components of public sector

Federal Government:- Ministries, Departments &Public enterprises

State Government:

- Departments & publicenterprises

Local Government:

- Departments Federal Statutory Bodies

Off-Budget Agencies (OBA)

4 main components:-Federal government

-States government

-Local government

-Federal statutory bodies



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Components of public sector ..cont

GOVERNMENT AGENCIES statistic:

AGENCY NO. OF DEPTS %

Federal Public Service 126 18%

State Public Service 256 36%

Federal Statutory Body 88 12%

State Statutory Body 93 13%

Local Government 146 20% TOTAL 709 100.00



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Management mechanism of

the Malaysian government Divide into various level:

Policy maker

Parliament, ministries

Implementation

Department, agencies

Watchdog agencies

Auditor general, MACC, IIT,

etc

Level of mechanisms:

-Policy maker

-Implementation

-Watchdog



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Main Activities

Main activities in Malaysian public sector Financialmanagement are:

Budget Estimates revenue and expenditure for that year

Accounting Recording the allocation and actual revenues and expenditure

based on the code and object

Reporting Prepare a reporting that consist of BS, I&S statement, notes to

the accounts and memorandum statement Auditing

Audit all the financial report and record together with theperformance audit



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Roles of public sector accountants

Play and important role in enhancing:

Accountability

Integrity

Efficiency of both public money and property



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The users and uses of

Financial Report External users:

Citizens/voters, tax payers,assembly man, analyst andmass media.

Internal users:

Government (executives),legislation bodies andauditors.

2 categories of users;

Internal

External



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Conclusion

Main activities for PSA are budget, accounting,reporting and auditing.

Main Purposes to achieve accountability and

fulfill the legality Basic procedure and requirement need to

refer and follow the Law requirement before

accounting standard The users of information include policy maker,

parliament members and citizens.



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Tutorial Questions

1.Discuss why public sector accounting is one of

the legal requirement in Malaysia.2. Explain what you understand about the

following;

- Ministries and departments- Accountability and stewardship

- Off-budget agencies

3. Discuss FOUR (4) main roles of public sector insupporting the government aspirations

4. Q 5 & 6 text book pg.26


ACW 420 - TOPIC 1 public sector

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