A company, as an economic entity, is considered an independent economic, technical and social entity whose function is to produce goods and to provide services, using certain resources in order to make profit and achieving other goals, while taking certain business risk. Through the efforts to minimize that risk, companies have developed a concept of corporate governance system that includes rules, procedures and laws by which business is ran, controlled and regulated, i.e. companies have developed a system of internal control that includes internal controls, audit and controlling. Each of these monitoring mechanisms contributes to a company’s performance depending on its core function. Internal controls imply various methods and procedures that are implemented in order to obtain concrete knowledge about business efficiency, reliability of financial statements, compliance with laws and regulations, etc. Internal audit contributes to the added value of the company by auditing overall business system. The task of internal audit is to evaluate, research, examine and analyze the part of control model and to provide management its expert opinion in the form of reports, while controlling is an advisory - management and analytical - information function that contributes to more successful company managing. The state, which by definition is an organized social community under a common political system, due to the limited impact of market activities cannot be considered as a production unit, but it should certainly be considered as an economic entity. The concept of the term state is possibly easiest to explain as a large, organized system of small parts financed through a single budget through the public finance system, where each of the small parts is operating through by law defined limits in order to provide a complete, timely, useful and complete service to the citizens. Transparency of the state system, i.e. its finances, as well as the entire business, can be described as a whole, complete and timely public disclosure of all relevant information in a systematic way. However, the public sector is a large, complex and specific system and it is not enough to define legislation uniformly, therefore, following the inherited EU legislation, the Republic of Croatia has defined a mechanism of internal control in the public sector, which includes a system of internal controls and internal audit, but without controlling. Inspections are also performed in the public sector, which are not discussed in this work, but among employees there is a lack of understanding of the terminology of inspection, internal supervision and system of controls. Therefore, it is important to note, while implementing and determining the internal control mechanism, that it is necessary to think outside of the box tha will set up a lot of questions and provide new opportunities to create more efficient monitoring system in certain parts of the public system so the whole public system could be more efficient. That certainly requires constant education of, both, state leaders and employees, and raising awareness of the effects of a good internal control system. In most units of the public sector, the function of internal control is established only to satisfy the legal form, where, for example, one person is in charge of financial controls and internal audit. In larger systems such as cities, it is logical that such organization will not achieve the maximum of the internal control system possibilities. Although for now the third mechanism of internal supervision in the public sector of Republic of Croatia is not sufficiently recognized (except for public companies), if the advantages of controlling were recognized in the governing structure and it became legally mandatory, one certainly could not and would not properly perform all three internal control functions. Therefore, it is first necessary to distinguish, define and clarify, and lastly educate the public sector about needing of accepting the controlling, as well as its advantages. The City of Zagreb has recognized the need of a good organization of the internal control system, and due to the complexity of the tasks and risks that accompany the management of such a large system, has established its own independent control unit, the City Control Office. In today's increasingly demanding internal and external business environment, with a large number of employees (in 2021., 4.8 billion HRK are employees' salaries or 38% of planned expenditures), a large number of budget entities (330 entities in the current budget year), a budget of 13.65 billion HRK (for 2021) and a large number of other entities that are directly business related with the City, the idea of a completely legal, transparent and efficient business may seem a bit utopian. Work of the City Control Office, as an internal control unit, fulfills its purpose, but by precisely defining the vision, mission and goals of the Office, as well as the authorities and responsibilities, the work efficiency would be higher. By implementing the controlling function, by employing a larger number of professional and educated employees, the Office would, and consequently the entire system, achieve better results. For a thorough and purposeful reorganization, it is necessary, with the consent of the mayor and the City Assembly, to educate and motivate employees, create a detailed reorganization plan. Time is an indispensable element. The City of Zagreb could be an example of good practice in understanding, visioning, implementing and successfully using the controlling function (and the entire internal control system) in the public sector. This paper strive to confirm the need to introduce controlling as a component of internal oversight in the public sector. Depending on the requirements and needs of each subject of the state budget, it is considered that the introduction of a customized control function comprehensive internal control would increase the transparency and efficiency of the public sector. The current system of internal controls and audits is not sufficient to develop satisfactory transparency and it is necessary to create a base for a more efficient system. This work will try to present that through explaining of the public sector economy, defining each of the functions of internal control, making a review of the current case of the internal control system (based on legislation) and finally, through the example of the City of Zagreb, confirm the thesis.