Session 1 Datuk Wan Selamah
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1
By:By:By:By:
Datuk Wan Selamah binti Wan SulaimanDatuk Wan Selamah binti Wan SulaimanDatuk Wan Selamah binti Wan SulaimanDatuk Wan Selamah binti Wan Sulaiman
Accountant General of MalaysiaAccountant General of MalaysiaAccountant General of MalaysiaAccountant General of Malaysia
CURRENT STATUS OF PUBLIC SECTOR CURRENT STATUS OF PUBLIC SECTOR CURRENT STATUS OF PUBLIC SECTOR CURRENT STATUS OF PUBLIC SECTOR ACCOUNTING IN MALAYSIA AND THE WAY ACCOUNTING IN MALAYSIA AND THE WAY ACCOUNTING IN MALAYSIA AND THE WAY ACCOUNTING IN MALAYSIA AND THE WAY
FORWARDFORWARDFORWARDFORWARD
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OVERVIEWOVERVIEWOVERVIEWOVERVIEW
• IntroductionIntroductionIntroductionIntroduction
• Where Are We NowWhere Are We NowWhere Are We NowWhere Are We Now
• The Way ForwardThe Way ForwardThe Way ForwardThe Way Forward
• ConclusionConclusionConclusionConclusion
INTRODUCTION
Components of Public Sector
• Federal Government
• State Government
• Federal Statutory Bodies
• State Statutory Bodies
• Local Government, Town, District Councils &
City Halls
• Islamic Council of Malaysia
Accountant General’s Authority
Ch
ief
Acc
ou
nta
nt
Accountant General is the chief accountant of the Federal Government and Chief Division of the Federal Treasury with the authority in all accounting matters and procedures relating to Federal and State Government accounts.
Treasury Instruction
He
ad
of
Se
rvic
e
Accountant General is the Head of Service for Accountants, Assistant Accountants and Book keepers (Accounting Technician)
Re
gis
tra
r fo
r th
e U
ncl
aim
ed
Mo
nie
s
Accountant General was appointed by the Minister of Finance as the Registrar of the Unclaimed Monies under the Unclaimed Money Act 1965 effective from 1 Jun 1975.
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Where Are We Now?
• Current Basis of Accounting
• Current Accounting Standards
• Financial Statement Performance
• Timeliness
• Quality
• Current Accounting System
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Current Basis of Accounting
Components Accounting Basis
Federal Modified Cash Basis
State Modified Cash Basis
Local Government Modified Accrual Accounting
Statutory Bodies Accrual Accounting
Islamic Council of Malaysia Modified Accrual Accounting
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Current Basis of Accounting
• Transaction and other events are recognized on acash basis during the year. Any unpaid accounts andreceivables are taken into account for a month afterthe year end
Modified Cash Accounting
• Economic events are recognized when they occurregardless of when cash transaction occur, meaningeconomic events are recognized by matchingrevenues to expenses at the time in which thetransaction occurs rather than when payment ismade (or received).
Accrual Accounting
• Transactions and other events are recognized on accrual basis, but certain classes of assets or liabilities are not recognized. A typical example is the expensing of all non-financial assets at the time of purchase.
Modified Accrual Accounting
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Limitation of Modified Cash Basis
• Simpler but the concept is
unfamiliar
• Ease of manipulation
• Less comprehensive – cash
information only
• Provides only basic information –
commitment information are not
available
• Higher implementation cost –
because of customization and
limited availability
• No information provided for non
financial asset management
• Limited credibility and
accountability (especially by
Rating Agency)
• Limited basis for determining
fiscal strategy
• Limited product/service pricing
• Limited disincentives for fraud
and corruption
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Current Accounting StandardsComponents Accounting Standards
Federal International Public Sector Accounting Standard (IPSAS)
– Cash Basis
Government Accounting Standard (PPK)State
Local Government International Financial Reporting Standard (IFRS) -
(Requirement for Securities Commision and Bank Negara*)
Private Entity Reporting Standard (PERS)
Malaysian Accounting Standards Board (MASB)
Pekeliling Kemajuan Perkhidmatan Awam (PKPA) Bil. 1/2011
Statutory Bodies
Islamic Councils
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Financial Statement Performance
Components Submission Date
Federal For the past 10 years, the Financial Statement of the Federal
Government was submitted to the Auditor General latest by
15 March
State The Financial Statements for the 11 States (excluding Sabah &
Sarawak) were submitted not later than 31 March every year
since 2006
Local Government* Submission of Financial Statement to the Auditor General can
and need to be improved
Statutory Bodies Data from 10 statutory bodies showed that Financial
Statements for the year 2008 and 2009 were submitted before
31 May
Financial Year Date Of Submission
2001 12 Mac 2002
2002 3 Mac 2003
2003 8 Mac 2004
2004 9 Mac 2005
2005 8 Mac 2006
2006 9 Mac 2007
2007 3 Mac 2008
2008 6 Mac 2009
2009 8 Mac 2010
2010 4 Mac 2011
Submission Of Federal Government
Financial Statement To Auditor General
Submission Of State Financial Statement
To Auditor General
STATE 2006 2007 2008 2009 2010
Perlis 17.04.2007 08.04.2008 26.03.2009 18.02.2010 01.02.2011
Kedah 10.04.2007 31.03.2008 05.04.2009 25.02.2010 20.03.2011
P.Pinang 9.02.2007 02.01.2008 09.01.2009 19.01.2010 18.01.2011
Perak 18.04.2007 28.03.2008 18.03.2009 12.02.2010 08.02.2011
Selangor 16.05.2007 10.06.2008 08.04.2009 02.03.2010 14.02.2011
N.Sembilan 13.04.2007 29.02.2008 27.02.2009 24.02.2010 21.02.2011
Melaka 30.04.2007 21.04.2008 03.04.2009 09.04.2010 24.03.2011
Johor 03.08.2007 15.03.2008 13.03.2009 23.02.2010 25.02.2011
Pahang 16.04.2007 30.04.2008 08.04.2009 25.02.2010 23.03.2011
Kelantan 30.04.2007 22.04.2008 22.04.2009 23.02.2010 27.02.2011
Terengganu 15.02.2007 10.02.2008 10.02.2009 10.02.2010 10.02.2011
Submission Of Financial Statement
To Auditor General (Sample of 10 Statutory Bodies)
No Federal / State Statutory Bodies ABB. 2008 2009
1. Universiti Tun Hussien Onn Malaysia UTHM 21.4.2009 29.4.2010
2. Agensi Kelayakan Malaysia MQA 17.4.2009 14.4.2010
3. Perbadanan harta Intelek MYIPO 30.4.2009 30.4.2010
4. Universiti Darul Iman Malaysia UDM 22.2.2009 4.3.2010
5. Lembaga Perindustrian Nanas Malaysia LPNM 15.5.2009 9.3.2010
6. Lembaga Pelabuhan Kuantan PLPKTN 3.3.2009 9.3.2010
7. Universiti Putra Malaysia Serdang UPMS 30.1.2009 22.2.2010
8. Universiti Malaysia Terengganu UMT 23.3.2009 25.2.2010
9. Lembaga Kemajuan Perindustrian Malaysia MIDA 30.4.2009 30.4.2010
10. Institut Penyelidikan Keselamatan Jalanraya Malaysia MIROS 13.3.2009 18.3.2010
Revised Federal Government Financial
Statement Effective 2010Description Old Format Revised Format
Statement by Secretary
General to the Treasury
and Accountant General
of Malaysia
Not available Available
Financial Statement • Balance Sheet
• Statement of Cash
Receipts and Payments
• Statement of
Memorandum Account
• Notes to the Account
• Statement of Financial
Position
• Statement of Financial
Performance
• Statement of Cash
Receipts and Payments
• Statement of
Memorandum Account
• Notes to the Account
Description Old Format Revised Format
Statement of Cash
Receipts and Payments
Not applicable Comply with new
requirement in IPSAS para
1.10
Financial Performance Not available Available
Statement of
Memorandum
Memorandum of Asset Taken out
Title Public Account Federal Government
Financial Statement
Presentation Information overload and
redundant
Precise and understandable
Revised Federal Government Financial
Statement Effective 2010
Research Conclusion
Single set
of financial
reportingHarmonization
Harmonization of financial reporting format
Enhance
accountability
and transparency
Better corporate
governance
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Description PKPA Bil. 1 /2007 PKPA Bil. 1 /2011
Definition of SAGA Standard Accounting
package approved by
Government
Accounting package
available in the market
which can be customised
according to GAAP.
Scope of work Not mentioned System architecture must be
approved by Accountant
General’s Department (AGD)
Structure of Corporate
Governance
Not disclosed Disclosed
Post Implementation Review
(PIR)
Not mentioned Agency and Ministry level
Implementation of SAGA Federal Statutory Bodies
only
Federal Statutory Bodies,
State Statutory Bodies, Local
Authority and Islamic
Council
PKPA Bil. 1 /2007 vs. PKPA Bil. 1 /2011
Current Accounting Systems
Components Accounting System
Federal Government Financial and Management Accounting System
(GFMAS)
State State Government's Standard Computerised Accounting
System (SPEKS)
Local Government
Standard Accounting System for Government Agencies (SAGA)Statutory Bodies
Islamic Councils
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Government Financial and Management Accounting System used in AOs and HO for financial planning, budget control and Government accounting combining accounting functions including payments, receipts, remuneration control, unclaimed monies, government loans, loans and advance payments, investments and preparation of the Public Accounts.
GFMASGFMAS
Electronic Budget Planning and Control System used in RCs for budget and expenditure control and monitoring.
eSPKBeSPKB
ElectronicTerimaan to facilitate and standardize Government’s collection and accounting process in the RCs and accounts reconciliation between RCs and AOs.
eTerimaaneTerimaan
eSPKB/eTerimaan and GFMAS integrate with one another.
Current System and Process Overview – Federal
The Way Forward for Public Sector Accounting
STRATEGY REFORM INITIATIVES’s (SRI)
LAB (Accrual Accounting)
OUTCOME BASED BUDGETING (OBB)
DATA DICTIONARY FOR PUBLIC
SECTOR (DDSA)
ACTIVITY BASED COSTING (ABC)
Public Sector
Accounting
Outcome Based Budgeting (OBB)
Time
Progress
2011 2012 2013 2014 2015 2016 2017
OBB Implementation
Migration from Modified Cash to
Accrual Accounting
Activity Based
Costing
Ministry’s
programs
under MBS
Alignment
of
programs
with
National
Thrust
and KRAs
Activity
Based
Costing
of
resources
Results
Frame
work
OBB results
Migration towards Accrual Accounting
Level of transformation
Degree of
Results Focus
Malaysia has embarked on the implementation of Outcome Based Budgeting (OBB).
Accrual accounting complements OBB as an effective fiscal management tool. Accrual
accounting sets the platform for implementation of Activity Based Costing.
SRI Lab - Accrual Accounting
• Aspiration of the Malaysian Government of
attaining developed nation status with the drive
for “People first, Performance now”.
• Migration to accrual accounting has been
stipulated as a policy measure in the NEM Report.
• The adoption will put the Malaysian public sector
finance practice to be in line with the developed
countries.
Outcome of Accrual AccountingKey Result Area (KRA) of Accrual Accounting
Enabling More
Efficient and
Effective Fiscal
Management
Information on consumption of
resources that supports sustainability
of fiscal policies
An essential component of the results
framework of accountability of
programs under Outcome Based
Budgeting
• Accounting for consumption of resources
• Improve performance and financial management of each agency
Accountability
• Facilitate revenue management by each agency
• Promotes intergenerational equity of public policies
• Completeness of accountability of resources
Sustainability
• More effective measure in complimenting results framework of OBB
• Better accountability of executive government
Better Measure of Policies Effect
• Curbs teeming and lading of expenditure
• Promotes transparency
• Minimizes year-end shopping
• Compatibility with developed economies
Promote Greater Integrity
• Compliment results framework of OBB
• Costing of outputs and measured against outcomes
Organizational Efficiency and Effectiveness
More Efficient and
Effective Fiscal
Management
Why Accrual Accounting?How Can Accrual
Accounting Benefit the
Public Sector in
Malaysia?
• Costing data of output
enables more effective
evaluation of
alternatives to achieve
the outcomes – Cost
Savings
• Information on assets
facilitate unlocking of
values – Revenue
Generation
• Assets listing provide a
database for
infrastructure
management leading
to better maintenance
of assets – Better
Service Delivery
Trends in Developing Countries
DMC Current Basis General Direction
Fiji Islands Modified cash Accrual
Indonesia Modified cash Accrual
Marshall Islands Modified cash Accrual
Philippines Modified accrual Accrual
Sri Lanka Modified cash Accrual
Azerbaijan Accrual Accrual
China, People’s Republic of Modified accrual Accrual
Mongolia Modified accrual Accrual
Uzbekistan Accrual Accrual
Selected ADB Developing Member Countries: Direction of Government Accounting
Malaysia is not yet in the radar screen of accrual accounting
Migration Path
Modified Cash
Modified Accrual
Accrual Accounting
“As-is” Status
• Assets are not
capitalized
• Liabilities are
recorded outside
the accounting
system
• System is
distributed and
disparate
• IPSAS cash basis of
accounting
• Costing information
is not integrated
Phased Out
Approach
• Record Accounts
Payable (AP)
• Record Accounts
Receivable (AR)
• By 2014
“To-be” in 2015
• Assets and
liabilities are
accounted for
• Centralized system
with single
database
• Fully integrated
with OBB and
other relevant
systems
• Full IPSAS
compliant on
accrual accounting
• Costing data on
outputs, programs
and activities
Accrual accounting
together with Activity
Based Costing will
transform existing data
to information and
eventually to
knowledge where
better informed based
actions can be taken
Data
Information
Knowledge
Action
Activity Based Costing
• Activity-Based Costing (ABC) is a
method of allocating costs to
products and services
• Used as a tool for planning and
control
• Allows managers to attribute
costs to activities and products
• Costs can be identified and
passed on to users only when the
product or service uses the
activity
• Identify high overhead costs per
unit and finding ways to reduce
the costs
• To facilitate OBB implementation
and evaluation
• Integration of ABC and Accrual
Accounting will produce a useful
information for decision making
Public Sector Data Dictionary (DDSA)
What is DDSA?
• Data Dictionary is defined as
description of data
• DDSA set the standard for data
description to be used by public
sector agencies
• AGD involve in 4 out of 11
Working Groups
•Accounting and Finance - Chairman
•Data Generic - member
•Human Resource - member
•Project Monitoring - member
Objectives of DDSA
• Ease of implementation and
integration of application systems
within and between agencies
• Facilitate the exchange of data
between government agencies
• Assisting agencies in the
development of application systems
• Allow users to communicate with
each other using the same definitions
and data format
• Facilitate communication between
the public and private sectors
through the use of standard data
definitions
Evolution (Federal)
Modified Cash Basis Modified Cash Basis
Before
Accrual basis
Current Future
Branch Accounting
SystemGFMAS 1 GFMAS
IPSAS AccrualIPSAS Cash (Revised)IPSAS Cash
Evolution (State)
Modified Cash Basis Modified Cash Basis
Before
Accrual Basis
Current Future
Manual SPEKS SPEKS (Accrual)
IPSAS AccrualIPSAS CashIPSAS Cash
Evolution (Local Government, Statutory
Bodies)
Modified Accrual Basis Accrual Basis
Before
Accrual Basis
Current Future
Manual , SAGA,
Other systemsSAGA SAGA
IPSAS Accrual
IFRS, PERS,
MASB
IFRS, PERS,
PKPA 1/2011,
MASB
IFRS, PERS,
MASB
IFRS, PERS,
PKPA 1/2007,
MASB
CONCLUSION
Implementation of Accrual Accounting together with OBB and ABC
is hoped to bring Malaysia at par with other developed countries
OBBAccrual
AccountingABC
At par with
Developed
Countries
Full support , commitment and cooperation from every one of you is very much needed to make
this transformation a success
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