BKAL 3023 PUBLIC SECTOR ACCOUNTING

SECOND SEMESTER 2019/2020 (A192)

GROUP: B

TUTORIAL 1

PREPARED FOR:

DR MUHAMMAD SYAHIR BIN ABDUL WAHAB

PREPARED BY:

1. NURUL HUWAIDA BINTI ABDUL RAZAK 255836

2. NUR AZLINDA FARISHA BINTI MOHD NANYANG 255861

 NURUL SHAHIRAH BINTI MAHAMED SUKOR

3. 255913

4. NUR MAISYA BINTI MOHAMAD NOOR 255931

NUR RASYIDAH HUSNA BINTI RAMLE

5. 256192

SUBMISSION DATE:

4 MARCH 2020
 TUTORIAL 1
BKAL 3023 – PUBLIC SECTOR ACCOUNTING A192

Answer the following questions:

(a) Briefly discuss SEVEN (7) key characteristics of Malaysian public sector
accounting.

i. Compliance with the legal requirements

The main purpose of public sector accounting as describe by the CIPFA, 2012 is to
maintenance of books and all records properly and it is must compliance with the
related laws, rules, ad regulations and provides a comprehensive and accurate reports
to responsibility parties. Therefore, the most important aspect need to consider is the
regulations that bound the accounting itself.

ii. Budgetary Accounting

Budgetary accounting refers to the practice where public sector organizations keeping
and presenting their operating accounts in the same format and alongside their
budget. The main purpose of this practice is to emphasize the budget’s role in the
cycle of planning-control-accountability. Through budgetary accounting the
responsibility officer can easily monitoring and control the approved allocation by the
legislature through budget. The objective of “budgetary accounting” is to enable
verification of the observance by Government of the budgetary authorizations granted
by Parliament.

iii. Vote Accounting

Vote accounting refer to the accounting practiced that consist of the following
criteria; Firstly, all revenues and payments should account into consolidated account
or fund, namely federal consolidated fund at the federal level and state consolidated
fund at state level; Second, spending can only take place if specifically authorized by
the parliament; Third, all the spending is authorized on annual basis (budget) and
unspent balances at the end of the year are returned back to consolidated fund and the
fourth, spending is authorized for a specific purposes and virement procedure need to
be approved by the authority before any transfer between any object of expenditure
are made.

iv. Fund Accounting

Public sector accounting system should be organized and operated on a fund basis. A
fund is referring to fiscal and accounting entity with a self-balancing set of accounts
recording cash and other financial resources, together with all related liabilities and
balances and changes which are segregated for the purpose of carrying on specific
activities in accordance with special regulations and limitations. There are a number
of funds created and manage by the government such as revenue fund, trust fund, loan
fund, development fund etc. a complete set of financial statement may be prepared for
each of fund.
v. Accounting basis
 Basis of accounting refers to when the effect of transactions or events should be
recognized for financial reporting purposes. Public sector accounting multi type on
accounting basis depends on the nature of that agency. Federal and state government
practiced modified cash basis, where transactions and other events are recognized on
cash basis during the year and any unpaid accounts and receivables are taken into
account for a month after the year end. On the other hand, local government and
Islamic religious council practiced modified accrual where transactions and other
events are recognized on accrual basis, but certain classes of assets or liabilities are
not recognized. Another entity, statutory body are practiced accrual basis where
economic events are recognized when they occur regardless of when cash transaction
occur, meaning economic events are recognized by matching revenues expenses at
the time in which the transaction occurs rather than when payment is made.

vi. Standardize and specific coding system

Standard and comprehensive code of accounts are developed by the federal treasury
and are compulsory for all level of the government agencies. The code of accounts
comprises of all types of revenue generated by the government agency and all the
expenditures made by the government. It means that all government agency will
adopt the same code of account for a specific item.

vii. Financial reporting

The government are requires to prepare the financial statements at the end of the year
and need to submit to auditor general office for the endorsement. Financial statements
for federal and state government are comprises of statement of financial position,
statements of financial performance, statement of cash receipts and payments,
statement of memorandum account and notes to the account. For agency that
practiced accrual basis or modified accrual basis their financial statements are
comprises of statement of financial position, statement of financial performance,
statement of cash flow, and notes to the account.

(b) Malaysian Federal Government adopts the principle of separation of powers

under Federal Constitution 1957. It has three branches, namely, Executive,
Legislative and Judiciary. Briefly explain each of the branch.

i. Legislative Branch
The federal legislative branch has a power related with laws (passing, amending and
repealing act of laws). Article 44 of the Malaysian Constitution stipulates that the
legislative authority of the federation shall be vested in the Parliament, which consist
of the YDPA, and two Houses of Parliament (House of Senate and House of
Representative). House of senate comprises of 70 members and they are appointed for
three-year terms (to a maximum of two terms). 26 members are elected from 13 State
Assemblies, while 44 are appointed by the King base on the advice of the Prime
Minister. House of Representative comprises of 222 elected from single-member
constituent by universal adult suffrage. The parliament follows a multi-party system
and the governing body is elected through a first-past-the-post system (FTPS).
Parliament has a maximum of five years by law. The King may dissolve parliament at
any time and usually does so upon the advice of the Prime Minister.

ii. Executive Branch

The executive branch (known as government) has a power to govern a country
provided by the Constitution through introducing and enforcing the laws, policies and
others. Executive also have the power to generate revenues through the collection of
various taxes, levies, fines, summons, customs duties and fees from the general
public. The Malaysian executive branch consists of YDPA, Prime Minister and
Cabinet members. The power of the executive branch is vested in cabinet led by the
Prime Minister. The Malaysian Constitution stipulates that the Prime Minister must
be a member of the House of Representative, who in the opinion of the YDPA,
commands a majority in the Parliament. The cabinet is chosen from the members of
both houses of Parliament and is responsible to that body. The Cabinet Minister is the
body that exercise the power of executive.
The main objective of the Cabinet member is to legislate the government policies
and directing the federal government to carry out those policies. The Cabinet
members comprise of minister and deputy minister appointed by the YDPA on the
advice of the Prime Minister. Moreover, the cabinet minister is also made up of those
who represent the party with a majority in Parliament. The cabinet has meetings from
time-to-time to come out with policies and discuss important matters. The cabinet is
responsible to determine government’s policies and to issue directives for their
implementation by the government administrative machinery at the federal and state
levels. Is addition, the Cabinet also act as advisory body to the YDPA.

iii. Judiciary Branch

The judiciary also known as the judicial system judicature is the system of courts
which interprets and applies the law in the name of the sovereign or state. The
Judicial body is a body free from political influence or pressure by any party
including the executive and the legislative. According to article 127 of the Malaysian
Constitution, the behavior of the judges of the Federal Court, Court of Appeal or High
Court cannot be simply discussed in any Parliamentary Council. The judge is chosen
by the YDPA who acts on the advice of the Prime Minister after the consultations
with the Council of Rulers. According to Article 126 of the Constitution, whoever
disrespectful to the Federal Court, the Court of Appeal or the High Court can be
punished.
The judiciary also provides a mechanism for the resolution of disputes. Under the
doctrine of the separation of powers, the judiciary generally does not make law or
enforce law, but rather interprets laws and applies it to the facts of each case. The
power of judiciary branch is exercise by the courts. The judiciary branch is
comprising of the YDPA and a Chief Justice. The courts have four main areas of
jurisdiction, which are the power to interpret the constitution, power to interpret a
law, power to proclaim a written federal or state law invalid and the power to declare
a government action is invalid in the eyes of the law. However, Courts are
empowered to declare a written federal or state law invalid if;
a) The law clashes with Article 74, [1] of the Constitution.
 b) The law is outside the jurisdiction of Parliament or outside the jurisdiction
of the State Legislature, Article 74[1] and [2] or
c) The state law contradicts the Federal law, Article 75

(c) Identify FOUR (4) main financial management activities practiced by Malaysian
government as outlined in the Federal Constitution, 1957. (Please support your
answer with the appropriate Provisions/Articles in the Federal Constitution).

i. Budgeting
Art 99 (1)(2)(3)
Budgeting can be defined as an estimated of revenues and expenditures for a
government and it is expressed quantitatively. Budget is a plan showing how
resources will be acquired and used over a specified time interval. The budget
or estimation of financial statement should be made for every year and that
statement also should be laid before the starting of another year where this has
been stated in the Federal Constitution according to the Article 99(1) the
YDPA shall in respect of every year financial year, cause to be laid before the
House of Representatives a statement of the estimated receipts and
expenditure of the Federation for that year, unless Parliament in respect of any
year otherwise provides, that statement shall be so laid before the
commencement of that year. In addition, the estimation of expenditure that are
stated in Federal Constitution under Article 99(2) (a) the total sums are
required to meet expenditure charged on the Consolidated Fund and (b)
subject to Clause (3), the sums required to meet the expenditure for other
purposes proposed to be met from the Consolidated Fund. Furthermore, sums
to be shown under paragraph (b) of clause (2) do not include several part
which stated according to Article 99(3) (a) sums representing the proceeds of
any loan raised by the Federation for specific purposes, (b) sums representing
any money or interest on money received by the Federation subject to a trust
and to be applied in accordance with the terms of the trust, (c) sums
representing any money held by the Federation which has been received or
appropriated for the purpose of any trust fund established by or in accordance
with federal law.

ii. Auditing
Art 106 (1)(2), 107 (1)(2)
The main function of auditing is to examine financial reporting with a view to
ensuring that financial reporting is free from error and fraud. Generally, the
role of the Auditor General in Malaysia is to inspect all government spending
every year. By conducting annual audits, the Auditor General shall assist the
Parliament in holding an account and making an account of all persons
entrusted with the management of public funds and resources. Based on
Article 105 (1) Federal Constitution, the Auditor General in Malaysia shall be
appointed by the Yang di-Pertuan Agong on the advice of the Prime Minister
and after consultation with the Conference of Rulers. The powers and
 functions of auditing for Auditor General have been stated in Article 106
where article 106 (1) mentioned that the accounts of the Federation and of the
States shall be audited and reported on by the Auditor General. Under Article
106 (2), the Auditor General must perform such other duties and exercise such
powers in relation to the accounts of the Federation and of the States. The
Auditor General also have to accounts other public authorities and of those
bodies which are specified by order made by the Yang di-Pertuan Agong, as
may be provided by federal law. Regarding to the reports of Auditor General,
Federal Constitution defined in Article 107 (1) and (2) where the Auditor
General shall submit his reports to the Yang di-Pertuan Agong, who shall
cause them to be laid before the House of Representative. The Auditor
General also need to submit a copy of any such report relating to the accounts
of the State, or to the accounts of any public authority exercising powers
conferred by State law to the Ruler or Yang di-Pertuan Negeri of that State,
who shall cause it to be laid before the Legislative Assembly.

iii. Financial reporting

Art 99(4), 102 (a)(b)
iv. Financial reporting includes all of a company’s communication of financial
information to the people outside of the company. The objective of financial
reporting is to provide information about the financial position, performance
and changes in financial position of an organization that is useful to users in
making decision. According to the Article 99 (4), Federal Constitution, as
practicable, the annual financial statement should show the assets and
liabilities of the Federation at the end of the last completed financial year.
Besides, financial statement should also show the manner in which those
assets are invested or held and the general purposes in respect of which those
liabilities are outstanding. In addition, the power to authorize the expenditure
on account or for unspecified purposes as stated in Article 102 (a), Parliament
shall have a power in respect of any financial year before the passing of the
Supply Bill and to be authorize by law expenditure for part of the year.
Furthermore, based on Article 102 (b) Parliament shall have power in respect
of any financial year to authorize by law expenditure for the whole or part of
the year otherwise than in accordance with Articles 99 to 101, if owing to the
magnitude or indefinite character of any service or to circumstances of
unusual urgency it appears to Parliament to be desirable to do so.

v. Financial accounting
Art 97, 98, 104
The main financial management activities practiced by Malaysian government
as outlined in the Federal Constitution, 1957 is about financial accounting as
stated in Article 97, Article 98 and Article 104. The Constitution requires the
government to make laws in order to collect revenues especially from taxes
and rates. This means that primary sources of revenues for the government
should be based on the laws approved by the legislative such as Income Tax
Act and Corporate Income Tax Act. In Article 97, the revenues collected
should be accounted into one account namely, Federal Consolidated Funds for
federal government and State Government. This is to ensure that all the
moneys raised and collected are accounted for. The government also has the
authority to withdraw the money form the Consolidated Fund for the purposes
such as charged expenditures as stated in Article 98. In addition to any grant,
remuneration or other moneys such as all pensions, compensation for loss of
office and gratuities for which the Federation is liable, all debt charges for
which the Federation is liable and the moneys required to satisfy any
judgement, decision or award against the Federation by any court or tribunal
will be charged on the Consolidated Fund. In making payment of any grant to
a State, the Federation should deduct the amount of debt charges payable to
the Federation by the State and charged on the Consolidated Fund of the State.
Debt charges include interest, sinking fund charges, the repayment or
amortization of debt and all expenditure in connection with the raising of
loans on the security of the Consolidated Fund and the service and redemption
of debt created. In Article 104, there is no money can be withdrawn from the
Consolidated Fund except the charged on the Consolidated Fund, authorized
to be issued by a Supply Act or authorized to be issued under Article 102.
Clause (1) does not apply to the sums mention in Clause (3) of Article 99. No
moneys can be withdrawn from the Consolidated Fund except in the manner
provided by federal law.