CONFIDENTIAL 1 AC/FEB2021/PSA522

SUGGESTED SOLUTION
FEB2021

SOLUTION 1

a. Two (2) component of government expenditure.

Operating or management expenditure

 Represents all charges to the budgeted allocation, consists of charged

expenditure (Art98) supply expenditure (Art100)
 Art 98 FC – Charged expenditure is an expenditure that has been approved by
parliament. Examples are any grant, remuneration, pension, compensation for
loss of offices and gratuities.
 Art 100 FC – Supply expenditure is an expenditure that has to be submitted to
the parliament for approval. Expenditure to be met from the consolidated fund but
not charged the on and shall be included in a bill known as supply bill.

Development expenditure

 Incurred for development purposes, amount usually large.

 To finance, the government usually borrows on long-term basis either from
internal or external financial Institutions.
 Allocated to domestic social services such as education and health, economic
services such as transport and public utilities, internal security and defense

(Any 3 points with explanations x 2 marks = 6 marks)

b. Four (4) functions of EPU:

i) Formulate policies and strategies for socio-economic development

ii) Prepare medium and long term plans
iii) Prepare development programmes and project budget
iv) Monitor and evaluate the achievement of development programmes and
projects
v) Advise government on economic issues
vi) Initiate and undertake necessary economic research
vii) Plan and co-ordinate the privatization programme and evaluate its
achievement
(Any 4 points x 1 1/2 marks = 6 marks)

c. OBB has created an integrated results framework at every level of the budget
process. Under OBB, the program structures are reviewed and refined through an
integrated program activity structure, which provides hierarchical linkages of ministry
programs and activities, and systematically aligns them to national priorities. It also
establishes a logical structure on how program information is strategically collected
and utilized for planning, budgeting, and M&E. Each program under OBB is an
intervention aimed at addressing a specific problem, compared to programs under
MBS, where many were institutional in nature. Activities are a common unit for under

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 CONFIDENTIAL 2 AC/FEB2021/PSA522

MBS and OBB, but they can only be mapped to one specific program, even where
they may contribute to achieving multiple program outcomes. This helps to create a
one-to-one match between the administrative and program-activity structures to
preserve accountability and line of sight. Outcome objectives, along with relevant
KPIs, are defined at all three levels of ministry, program, and activity. As the budget
book is still approved by program, the activity level detail is used for internal
management purposes within the ministry.
Or any relevant answers.
(Any 4 points with explanation x 2 marks = 8 marks)
(Total: 20 marks)

SOLUTION 2

a. Characteristic of fund accounting

 Each fund is an independent accounting entity whereby the revenue, loan and trust
account can stand on its own. This means making decisions independently
regarding the best use of limited resources.
 Each fund has its own set of accounts with complete double entry & financial
statements
 Each fund must be self –balancing and autonomous. Self-balancing means the total
of the assets of a particular fund must be equal to the total of liabilities and fund
balance. Autonomous means that although a governmental unit may be composed
of several different funds, they should be focus on its general government activities
and spending activities, where crucial decisions, objectives, goals can be identified.
(Any 2 points x 2 marks = 4marks)

b. Consolidated fund accounts.

Consolidated Revenue Account

All types of money or revenue received
Consolidated Revenue Account (except
used to maintain operating expenditure;
supply / operating expenditure (Art 100
Consolidated Trust Account.
except for loan & trusts are the sources to
Islamic religious revenue). The money are
namely charged expenditure (Art 98 FC) &
FC). Any excess will be contributed to the

Consolidated Trust Account

Set up under which all receipts & payments of both government & public trust funds &
monies received by the government for specific purposes are accounted for. Primary
types are Development Fund, Housing Loan Fund and Miscellaneous Government
Trust Funds.

Consolidated Loan Account

Established by the Federal & State government to keep all moneys received by way
of loan. Sources – domestic borrowing (local bank & financial institution) & external
borrowing (foreign banks, financial institution, IMF & World Bank) All receipts &
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 CONFIDENTIAL 3 AC/FEB2021/PSA522

disbursements are accounted for the purpose of repayment of outstanding loans &
transfer to other funds
(Explanations of consolidated account 2 marks each x 3= 6 marks)
(Relationships = 2marks)

c. Factors that could influence Malaysian government accounting agencies to the success
of the government administration

 Treasury - play a major role in the development of governmental accounting. Any

change to the accounting systems is under the control of Treasury.
 Ministries/Politicians - play an important role in the development of governmental
accounting. Politicians may give pressure for a change, if they want to.
 Technological changes - technological change has made an impact on
governmental accounting in Malaysia. The technology had been used to improve
accounting procedures and reporting.
 International pressure - Malaysia obtained loans from international bodies such as
the World Bank and the International Monetary Fund (IMF). These international
bodies would require Malaysia to practice transparency in its financial reporting and
disclosing accounting information on an accrual basis.
 Change from Modified Cash to Accrual Accounting - accrual accounting could
provide better accountability for the government. Accrual accounting would be more
appropriate even though the simplicity in implementing cash accounting is still the
first choice.
 New accounting standard-changing from cash to accrual accounting requires a
different set of accounting standard than the treasury circulars. Standard setter
should be an independent body from regulator (treasury) and the implementer
(AGD). An independent body should be set up.

 Or any relevant answers.

(4 points together with explanations x 2 marks = 8 marks)
(Total: 20 marks)

SOLUTION 3

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 CONFIDENTIAL 4 AC/FEB2021/PSA522

a. Factors to be considered in the process of changing from cash to accrual accounting in

the preparation of financial reporting of public sector:

 Redesigning the chart of accounts

 Collection accurate information on capital assets and their value
 Establishing long-term liabilities
 Recognizing and accounting for government’s receivables
 Drafting new legislation and standards for the accrual budgeting system
 Reporting debt and debt management
 Intensive training for users of the system at all level of government
 The acceptance of the new system by users
 The right IT system to be in place to record and report the data
 Or any relevant answers
(Any 4 points x 1.5marks = 6 marks)

b. Notes to the financial statements provides more information that contained on the face
of the financial statement and this enhances the understandability of the financial
statements.

 Accounting policies are in compliance with the laws, rules and regulations relating to
accounting and financial management of the Federal Government.
 Accounting entity includes all ministries and departments of the Federal
government.
 The financial year is defined by Section 3 of the Financial Procedure Act 1957 as a
period of 12 months ending on the 31st day of December every year.
 The financial statements have been prepared using Ringgit Malaysia (RM).
 The financial statements are prepared on the same basis as the budget to enable
comparison to be made.
 When there is a change in the presentation or classification of items, the
comparative amounts have been restated unless otherwise stated.
Or any other relevant answers.
(4 points x 2 marks = 8 marks)

c. The implication of information Technology (IT) on financial reporting in public sector:

 require more financial resources

 required of specialist IT skills. - technical IT and enterprise resource planning (ERP)
expertise are needed to make sure the government have a good internal control
system.
 The government need to consider redesigning the system to make sure it supports
the new system.
 require a lot of system changes: Adequate IT system is needed in recording and
reporting data
Or any relevant answers
(Any 3 points with explanations x 2 marks = 6 marks)
(Total: 20 marks)

SOLUTION 4

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 CONFIDENTIAL 5 AC/FEB2021/PSA522

a. Functions of PAC in relation to the public sector auditing process.

 PAC will examine Auditors’ report on whether expenditures exceeded authorized

limit and whether appropriations are not spent according to rules and regulations
 PAC will also examine whether individual programmed have achieve its objective
and whether value of money being obtained
 To ensure money spent in accordance to purpose and programmes as in approved
 To monitor that public officials spend money in most effective and efficient manner
 To maintain high standards of accountability
(Any 3 points X 2marks= 6marks)

b. Three (3) approaches to enhance accountability among public sector organization in

Malaysia

 Continuous revisions of policies and circulars

 Ensure the existence of good governance setting
 Strengthen the internal control system and practice
 Encourage performance achievement amongst staff through appropriate approach
 Create sufficient post
 Build active ‘public participation’
(Any 3 with explanation x 2 marks = 6 marks)

c. Evaluate the issues in Malaysian public sector auditing pertaining to the expansion and
transformation of information technology (IT) and information system (IS).:

 Be aware of IS security risks, controls and standards & to maintain their skills in
order to undertake effective audit
 Support from the top management & encourage worthwhile changes
 Understand the objectives & practical implication of the improved IS
 Auditor need training and development to upgrade their skills
 Need to be familiar with relevant information security regulations & be able to
recognise & understand the system
 Strong evaluation control to interpret audit findings
 Remain independent towards the implementation and operation of the systems they
audit
 Embrace changes by adopting audit approaches, which fits into the new information
system
Or any relevant answers
(Any 4 points x 2marks= 8 marks)

(Total: 20 marks)

QUESTION 5

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 CONFIDENTIAL 6 AC/FEB2021/PSA522

a. Credit Expenditure

Credit expenditure is when refund of payment has been received. For example,
personnel telephone charges or cancellations of cheques. There are two different
situations to be recorded in the votebook.i.e. when there is no requirement for
payment or requirement for repayment.
( 2marks)

b. Vote Book- refer appendix 1

(18marks)
(Total: 20marks)

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