public sector accounting

5/27/2018 Public sector accounting

1/33

1

BKAL 3023 PUBLIC SECTOR

ACCOUNTING

TOPIC 1: INTRODUCTION TO PUBLIC

SECTOR ACCOUNTING (PSA)


2/33

2

LECTURE OUTLINES

Introduction

Component of Public Sector Organization

Public Sector Accounting

Definition Purposes

Objectives and characteristics of PSA

Accountability and stewardship in public

sector Differences between public sector

accounting and accounting in privatesector

Users of public sector accountinginformation


3/33

3

INTRODUCTION

Public Sector

A political organization set up with power to direct,regulate and control mens activities to enable them to

live together harmoniously and constructively and tosolve their common problems.

Normally refers to the government sector


4/33

Component of PS in Malaysia

Federal Government:

- Ministries, Departments & Public enterprises

State Government:

- Departments & public enterprises

Local Government:

- Departments Federal Statutory Bodies

4


5/33

Component of PS in Malaysia..

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% 5


6/33

FEATURES / CHARACTERISTICS OF

PUBLIC SECTOR No individual shares of ownership

Operate within a framework of public authorization

and control

Plurality of objectives

Contributors of resources receive no direct interest

Varying accounting principles and practices

6


7/33

Public Sector Accounting (PSA)

a system of identifying, classifying,

recording, summarizing, analyzing &

reporting of financial data & information oforganization in accordance with accepted

principles, concepts, conventions,

standards & regulations.

7


8/33

8

Public Sector Accounting

(PSA).. Cont PSA will emphasis on:

Maintenance of books and all recordsproperly.

Compliance with the related laws, rules and

regulations.

Provides a comprehensive and accuratereports

Thus, accounting in public sector look at

both the money and public property to


9/33

9

Purposes of PSA

To fulfill the legal requirement

- eg. Art. 97104 FC, FPA, AA, etc. To achieve public accountability

- Financial (fiscal), management &

programme


10/33

10

OBJECTIVES OF PSA

To provide information necessary for

efficient, effective and economical management

of an operation and of the resources entrusted to it

To provide information to enable managers

to report on the discharge of their responsibilities

and to permit all public officials to report on

the public on the result of government operations

and the use of public funds (accountability)


11/33

11

Main Activities of PSA in Malaysia

Estimated revenue Actual revenue Preparation of financial report

Annual

budgetAccountin

g record

(dept &

Agency)

Annual

financial report

Estimated expenditure Actual expenditure Audit by Auditor General


12/33

12

Characteristics of Public Sector

Accounting

Budgetary Accounting

The budget serves as a master blueprint for planning, control,

and evaluation of governmental, proprietary, and fiduciary

fund financial positions.

Method

The approved amount will be credited to an appropriation

account and after actual expenditures, the account will be

debited. The balance in the accounts will show the approvedamount which not yet spend


13/33

Characteristics of Public

Sector Accounting .. cont

13

Fund Accounting

Fund Accounting- is an accounting system in which an

entitys resources are divided among two or more

accounting entities known as funds (Granof, 1998) .

Fund- a fiscal and accounting entity with self-balancing

set of account for resources, and claim against them, that

are segregated in accord with legal or contractualrestrictions or to carry out specific activities.

Fund accounting equation:

Asset = Liabilities + Fund balance


14/33

14


Accounting .. Cont

Vot accounting

- All the expenditure and allocation

need to be recorded in the vot bookbefore payment has been made.

Coding system- All the government entities need to

practised the standardised coding

system provides by the Treasury


15/33

15


Accounting .. Cont

Accounting basis

Government entities practiced 3 types of

accounting basis depend on the nature ofthat entity:

Commitment

Accrual

Cash


16/33

16

Example of Accounting Basis (Cash, Accrual, and

Commitment):

Activities Commitment Accrual Cash

Date 10 Jan 2011 15 Jan 2011 28 Jan 2011

ExpenditureRecord in vote

book:Purchase of

goods

Issue local

order

Record as

expenditureupon good

receives

Record as

expenditureupon cash

paid


17/33

17

Accountability and Stewardship

Accountabil i ty - The liability to give account for something to

somebody

- responsibility to fulfill obligation (Chambers

20th century Dictionary)

- The acceptance of responsibility for action

and decision (Alwyn Lim, 1986)

- Accountability is the obligation to give

answers and explanation concerning ones

actions and performance, to those with a right

to require such answers and explanations


18/33

Accountability and

Stewardship .. cont

18

Accountability - means answerability

-Public servant responsible for their action and

performance

Stewardsh ip - Willingness to be accountable for the well-

being of the larger organisation by operating

in the service, rather than in control, of thosearound us (Amstrong, 1997).


19/33

Accountability

19

Components of Accountability

Budgeting - provides the precise standards by which to

judge the annual accounts

Accounting - ensuring all receipts and payment of public

moneys follow the required regulations & are accounted

properly

-Auditing - to prove the existence of the evidence of

accountability. It provides independent judgement of the

govts financial statements


20/33

Accountability .. CONT

20

Types of Accountability

Financial (fiscal) Accountability

-Liability to ensure that all the transactions are accountedfor and the accounts are reliable and transactions really

took place above suspicion and in accordance to

prevailing rules and regulations

-comprised all aspects of compliance and management onthe part of government bureaucrats in administering govt.

operation.

-compliance means that the govt. Servants have to follow

the laws, rules and regulations when collecting revenues,


21/33

21

Accountability .. cont

Management Accountability

- Liability to ensure there is an effective,

efficient and economical utilization of

public fund by org. in achieving govt.

objectives.

- It is important because the fund

resources come from public money and

there is no individual ownership for the

mone and ublic ro ert


22/33

Accountability .. Cont.

Program Accountability

Liability to ensure that each program

which has been planned and implementedachieve the objectives set earlier in terms

of cost and output.

to determine whether the objectivesstipulated for the govt. organization are

being achieved

22


23/33

23

The Relationship between Accountability and

Stewardship

stewardship

Government Public

To deliver services & goods

Accountability

Financial Statement

To collect & spend

public money


24/33

24

INSTITUTIONAL MECHANISMS TO

STRENGTHENING PUBLIC

ACCOUNTABILITY Malaysian Anti-Corruption Commission

(MACC)

Public Complaints Bureau (PCB)

Parliamen (Dewan Rakyat and Dewan

Negara)

Auditor General Office (AG)


25/33

25

Efforts towards achieving

AccountabilityFINANCIAL

MANAGEMENT

FINANCIAL

ACCOUNTABILITY

MANAGEMENT

ACCOUNTABILITY

PROGRAMME

ACCOUNTABILITY

IMPLEMENTATION

1) Control system:

Tender management

storage management

2) Infrastructure of Financial Management:

* Integrated accounting system

Computerize financial system (include vote book and others

financial instrument)

3) Financial management efficiency:

Macro accounting system

Modified budgeting system

4)New programs:

* Financial management award

Computerize budgeting system


26/33

26

ACCOUNTABILITY MODEL


27/33

27

Accountability model ..Cont..

1) Parliament:

Approves budget proposal

- No expenditure can be incurred withoutparliamentary approval

- No tax can be levied without necessary legal

process

- Parliament is the place where accountability in

govt. begins


28/33

28

Cont..2) Treasury: Keeper of the public purse

Examine expenditure proposals beforepresenting to parliament

Has the right to limit and suspend budget

3) Agencies:

Controlling bodies of agencies are required tomanage funds under their control in accordancewith govt. policies, procedures and circulars


29/33

29

Cont..

4) Auditor general:

Plays the role as the external auditor to govt.

To prepare audit reports for submission toparliament

Responsible to conduct:

- Financial audit (compliance)- Performance audit (output and goals)


30/33

30

Cont..

5) Public accounts committee (PAC):

Responsible to examine the public

account and the auditor general report ifthe account does not meet the proper

accountability of public fund by public

officials.


31/33

31

The differences between public and private

sector accounting

Public Private

1) Objective Public Accountability Financial Performance

2) Accounting Year 1 Jan31 Dec According to year

incorporated

3) Accounting Basis Cash/ Accrual/ Modified

Cash-basis

Accrual

4) Budget Preparation Mandatory Voluntary

5) Auditing

- appointment

- Scope

- Regulated in FC

-Financial, Compliance,

and performance

-BOD during AGM

-Financial and

Compliance


32/33

32

The Users of Public Sector

Accounting Information

External users:

Citizens/voters, tax payers, assembly man,analyst and mass media.

Internal users:Government (executives), legislation bodies

and auditors.


33/33

33

THE END..

public sector accounting

Documents

public sector accounting

public sector accountingpsa

public sectoraccountingtopic

onthe public

public officials

federal public service

state public service

accounting principles