PUBLIC SECTOR ACCOUNTING

APS 20103
FINANCIAL ACCOUNTING SYSTEMS AND
PROCEDURES
FINANCIAL PROVISIONS OF THE FEDERAL CONSTITUTION - REVENUE

Federal government and state government have their own sources of revenues
Revenues of the federal government are larger in terms of amount and sources
as compared to the state government
Federal government (article 96) the federal constitution states that the federal
law can impose any new charges in the form of tax or rate.
The revenues are due to the federal government except those that are assigned
to the states under article 110 of the Federal Constitution and those that are
collected by the local authorities and the religious department.
The revenues received in the form of entertainment duties, fees from courts and
treasure trove as listed in the schedule, the state government also receive annual
financial assistance from the federal government in terms of grants.
 STATUTORY GRANT

Three main categories of statutory grants

Payable under Article 109 of the federal constitution
(Capitation Grant,State Road Grant,State Reserve Fund)
Approved by the National Finance Council
(Grant for infrastructure)
Payable under various act of the parliament
(Revenue Growth Grant, Iron Ore Export Duty Grant)
 CAPITATION GRANT

To assist the states in their operating expenditure

Based on the population of a particular state.
The state with the most populace will receive the highest grant
Can be changed in accordance to Article 109(2) of the federal
Constitution, but if it is reduced, the reduction should not result in the
state getting lesser than 90 per cent of the capitation grant it
received in the previous year
 STATE ROAD GRANT

Given for purposes of maintaining the state roads in the state

State Road means any public road that the public has access (other
than federal road).
The maintenance of state roads means the preservation, upkeep and
restoration of state roads, roadside furniture, bridges, viaducts or
culverts forming part there of or
Connected therewith as nearly as possible in their condition as
constructed or as subsequently improved
 STATE RESERVE FUND

Given to the states applying for the grant, meaning it is not given
automatically to any state on annual basis
To assist any state government that has deficits in the current accounts
or for development purpose.
Based on the economic development, infrastructure and well-being of
the state applying for the grant
 REVENUE GROWTH GRANT

Given to the state governments whenever there is a growth or an

increase by more than 10 per cent on the revenue of the federation in
any financial year as compared to the preceding financial year.
A new act is named as the Revenue Growth Grants (Amendment) is to
increase to total amount of revenue growth grant to the state from
RM150 million to Rm250 million.
The Minister to review and vary the amount of grants.
Refer to table 4.3 shows that the calculation of revenue growth grant.
 FINANCIAL PROVISIONS OF THE FEDERAL CONSTITUTION -
EXPENDITURE
q Based on Article 98 of the Federal Constitution states that expenditure,
including any grant, remuneration or other moneys charged by other article or
federal, law shall be charged to the consolidated fund.

q Example government expenditure are pensions , compensation for loss of

office and gratuities, debt charge, money on judgement and decision or award
against the federation.

q In Article 100 of the Federal Constitution states that the expenditure to be met
from the Consolidated Fund but not charged , other than expenditure to be
met by such sums as are mention in clause (3) in article 99 shall be included
in Bill which known s Supply Bill. That means that need for the approval from
the parliament for any expenditure specified under the article.
q Under Article 102 of The Federal Constitutions states that parliament
‘s required also needed for any unusual urgency, such as stimulus
package due to global financial crisis and also supply bill needs to be
passed in order to authorize expenditure for the whole or part of the
year.

q In Article 103 allow parliament to make contingencies fund for an

urgent and unforeseen need for expenditure where there is no other
provision allowing for such purpose :tsunami disaster but need to be
present to parliament and the amount will b included in a supply bill.
 CONTROL AND MANAGEMENT FUND

q Consolidated funds are established in order to administer and regulate the

financial provision of the constitution.

q According to article 97,all revenue and moneys raised or received by the

federation shall be paid into federal consolidated fund, and the same applies to
the state consolidated fund, but excluding zakat, fitrah, baitulmal or similar
Islamic religious revenue.

q Article 104 states that no money should be withdrawn from the consolidated
fund except in the manner provided by the federal law and only allowed for
reason which is charged expenditure.
 BORROWING

q The state governments are further restricted to borrow only from the federal
government which permitted to borrow from bank or financial institution
approved by the federal government if the borrowing are for periods less
than 5 years.

q Sabah and Sarawak have their on special privileges which Article 112B that
allows both states to borrow under the authority of the states law within the
states, how ever only Bank Negara Malaysia approved the borrowing.

BUDGETS AND FINANCIAL STATEMENT

q Budget are important operational tools for controlling and managing public
moneys, while financial statement provide an avenue for the government to
prove its performance.
Article 99(1)
estimated receipts and expenditure Article 100
Supply Bill
Article 101
Supplementary estimates

Parliament approval

Withdrawal from consolidated fund

* Flow of process of withdrawals from Consolidated fund

Ø Supply bill known as supply act once it has been approved by the
parliament .

Ø The supplementary budget is prepared if the amount appropriated by the

supply act is insufficient. The purpose of such expenditure will be included
in the supply bill then will be submitted to the parliament for approval.
 Financial statement
will be audited by
after done
prepared

Remuneration Eligible for

provided by the reappointment but
parliament and Auditor not for any other
charged on the General appointment in the
consolidated fund. service of federal
or state.

Protected by the
Constitution of which
he may resign at any
time but not to be
removed from office
except as described
by the federal court.
 AUDITOR GENERAL

Terms and condition of service of the AG determined by the

federal law and shall not be altered to his disadvantage after
his appointment

Has the powers and duties to audit and report on the accounts
of the federal and states and also other duties in relation to the
accounts of the federal, state and pub;ic authorities as
specified by Yang di-Pertuan Agong.

Appointment be made by the Yang Di-Pertuan Agong upon the

advice of Prime Minister and consultation with the Conference
of Rulers

Audit report will then be prepared and submitted to the Yang

di-Pertuan Agong and to be laid tbefore the House
Representatives in the parliament.
THANK YOUJ
 FINANCIAL PROCEDURE ACT 1957

• Under Federal Constitution in terms of accountability and enforces the said

provision
• Objective of the Act :-
I. To provide guideline for the control and management of public finance
II. To provide financial and accounting procedure
III. To provide guideline on the collection , custody, and disposal of public moneys
IV. To provide the procedures for purchase , custody and disposal of public
properties
V. To provide the authority for the investment of money standing in the
consolidated funds
VI. To define and explain in detail the three accounts of the consolidated funds
VII. To enforce the provision of the constitution relating to finance
 ACCOUNTING OFFICER

Is a person who meet the qualification requirement as detail in section 60 of the Close
Corporate Act 1984
It may issues that accounting officer and other reports on the financial statement and
information close corporations and other entities
Every public officer who is charged :-
ü with the duty of collection, receiving , accounting , disbursing of public money
üWith the receipt , custody or disposal of public stores
Section 4 – Duties of accounting officer
üKeep such books and render (present) such accounts prescribed by this act or by
instruction issued by treasury
 LOAN ACCOUNT
- Domestic
borrowing
- External
borrowing TRUST ACCOUNT
REVENUE
ACCOUNT - Receipt from any
- All type of specific purpose
revenue received under any law or
agreement

CONSOLIDATED
FUND
 PAYMENT OF MONEY

Section 13 of Financial Act 1957 – any money to be withdrawn from the funds
must be made by way of warrant
Warrant letter authorised from Minister for the federal or Menteri Besar or chief
minister for the states
Case consolidate trust account – no money shall be withdrawn unless trust purpose
will be authorised by law
 VIREMENT
Under section 15(4) of Financial Procedure Act 1957
Virements define a transfer of allocation between subhead within the same
head

ESTIMATE
§Section 15 of the Financial Procedure Act 1957 required estimates to be
prepare order to show clearly the division and subdivision of expenditure
proposed, the amount expected to be received or spent a the year and
purposed of such expenditure
 WRITE OFF

Section 17 of the Financial Act 1957 – maintains that

Minister or Chief Minister has the power to authorise
write-off of any loses
This power extends to irrecoverable amount of revenue,
debt and overpayment
 GOVERNMENT ACCOUNTING STANDARDS

Have been developed and issued by the Accountant General Department since 2002

Objective: Prescribe the standards and the basis of presentation of the annual financial
statement

These standards must be complied with by the federal and state governments while
preparing their FS
 EXAMPLE: GOVERNMENT ACCOUNTING STANDARDS
GAS PARTICULAR ISSUE EFFECTIVE PURPOSE
PERIOD FOR FY
1 Government Nov 2002 2003 Federal Constitution and Financial
accounting Procedure Act 1957: To prescribe the
policies government accounting policies to be
used in the preparation of government
FS
2 Presentation of May 2005 Financial Procedure Act 1957: To
FS 2004 prescribe the standard for the
presentation of government FS
3 Revenue account May 2005 Financial Procedure Act 1957: To
2004 prescribe the accounting standard for
consolidated revenue account
4 Trust account Dec 2004 2006 Federal Constitution and Financial
Procedure Act 1957: To prescribe the
accounting standard for consolidated
trust account as instructed
5 Loan account Dec 2004 2006 Federal Constitution and Financial
Procedure Act 1957: To prescribe the
accounting standard for consolidated loan
account as instructed

6 Investment Dec 2004 2006 This statement must be used by the federal
government and state government handling
investment

7 Cash Dec 2005 2007 Financial Procedure Act 1957: To

prescribe the accounting standard for cash

8 Statement of Dec 2005 2007 Financial Procedure Act 1957: To

Memorandum prescribe the accounting standard for
account statement of memorandum account

9 Foreign exchange June 2007 2008 This statement must be used by the federal
governments
Which account for the trading and resulting
changes in foreign exchanges currencies
10 Government grant June 2007 2008 Financial Procedure Act 1957: To
prescribe the accounting standard for the
government grant
 MALAYSIAN PUBLIC SECTOR ACCOUNTING STANDARDS

It applies to all public sector entities other than government business enterprise (GBEs).

GBEs apply Malaysian Financial Reporting Standards (MFRS) and Private Entities
Reporting Standards (PERS) issued by the MASB.

COMPONENT APPLICABLE ACCOUNTING STANDARDS

Federal government International Public Sector Accounting
State government Standard (IPSAS) – Cash Basis
Government Accounting Standards (GAS)
Local government International Financial Reporting Standard
Statutory bodies (IFRS) – (Requirement for Securities
Islamic councils Commission and Bank Negara)
Private Entity Reporting Standards (PERS)
Malaysian Accounting Standard Board
(MASB)
Pekeliling Kemajuan Perkhidmatan Awam
(PPKA) Bill 1/2011