acw 420- topic 2

8/13/2019 ACW 420- TOPIC 2

1/49

TOPIC 2

GOVERNMENT STRUCTURE ANDTHE LAW FRAMEWORK IN PUBLIC

SECTOR ACCOUNTING

1ACW 420 - TOPIC 2

8/13/2019 ACW 420- TOPIC 2

2/49

TOPIC OUTLINES

Introduction Definition of Terminology Structure and administration of Malaysian Government

Federal State Local

The roles and powers of YDP Agung, Ruler Council, Executive, Legislative and Judiciary Law framework and accounting standards Legal provision

Federal Constitution, 1957 Financial Procedure Act, 1957 Treasury Instructions Local Government Act, 1976 Statutory Bodies Act 1980 Audit Act 1957 and others

Accounting Standard pronouncement Government Accounting Standard

MASB IAS IFAC GASB ISA and others

Reporting ObjectivesACW 420 - TOPIC 2 2

8/13/2019 ACW 420- TOPIC 2

3/49

Introduction

Malaysian is a country that practiceddemocracy system and federalism concept

Government of the people, by the peopleand for the people

Headed by the YDPA with limited ruling poweras the legislative implement the executivepower lead by prime minister

Concept of separation of power which areruling by Executive, Legislative and judiciary.

ACW 420 - TOPIC 2 3

8/13/2019 ACW 420- TOPIC 2

4/49

Definition of Terminology

Legal Provisions Refers to the any laws that passed by the legislative authority Including Constitution and Act, enactment, ordinance

Regulations Any rules that approved by the administrative/ministries

Including TI, TC, etc. Standards

Any rules that proposed and approved by the regulated professional bodies Including accounting standard (FRS, MASB, FRS), auditing standard, etc.

Statutory Bodiesany organization bodies with any names that are form under Federal Law

requirements and also the organizations that form Public Authorities orGovernment Agencies excluding the public authorities or organization thatare registered under Company Act 1965 (Section 2, SBA, 1980).

ACW 420 - TOPIC 2 4

8/13/2019 ACW 420- TOPIC 2

5/49

Definition of Terminology .. cont Federalism

Refers to two level of government administration that isfederal/central government and state government and in each musthave separate power and freedom to manage its own level without

interference. Separation of power

Refers to the power of YDPA as a head of the country will exercise by the three bodies namely legislative, executives and judiciary.

Local GovernmentRefers to any organization that Formed under Local Govt. Act 1976

ACW 420 - TOPIC 2 5

8/13/2019 ACW 420- TOPIC 2

6/49

Structure and administration ofMalaysian Government

Federal Government

ACW 420 - TOPIC 2 6

LEGISLATION EXECUTIVE JUDICIARY

COMMISSION AUDITORGENERAL

PARLIAMENT CABINET

HOUSE OFREPRESENTATIVES

SENAT E MINISTRIES COURT

JUDGES

YDPA

RULERSCOUNCIL

8/13/2019 ACW 420- TOPIC 2

7/49

Power of FG Federal list covers the areas of:

External affairs, Defense Internal security Civil and criminal law Citizenship Finance Commerce and industries Shipping Communication Health and labour

ACW 420 - TOPIC 2 7

8/13/2019 ACW 420- TOPIC 2

8/49


State government

ACW 420 - TOPIC 2 8

LEGISLATIVE EXECUTIVE High Court

COMMISSION

DUN EXCO

Ruler/Sultan

8/13/2019 ACW 420- TOPIC 2

9/49

Power of SG

States List covers areas of: Land Agriculture Forestry Local government Muslim law Several others

ACW 420 - TOPIC 2 9

8/13/2019 ACW 420- TOPIC 2

10/49


Local Government Consist of City Hall, City Council, Municipal Council

and District Council CITY HALL

Directly under the Federal

City Council State Administrative Centre

>100,000 Population >RM80 Million yearly yield Have financial institutions

ACW 420 - TOPIC 2 10

8/13/2019 ACW 420- TOPIC 2

11/49

Local Government ..cont

Municipal Council Town Centre >100,000 population

>RM20 Million yearly yield Administration centre

District Council Rural based

8/13/2019 ACW 420- TOPIC 2

12/49

Local Government ..cont Activities and Function Main activities of LG

Cleanliness Health development control and development


8/13/2019 ACW 420- TOPIC 2

13/49

The roles and powers of main

institution YDP Agung Constitution (Article 20(2), the executive powers

of YDPA has power in: Appointment of PM Not to consent to the dissolution of Parliament Request for a meeting of the Rulers Council

Roles and privileges The supreme head of state Acts on the advice of Parliament and PM except as

above by his won discretion


8/13/2019 ACW 420- TOPIC 2

14/49

Power of YDP Agung .. cont Given the right to appoint senators on the advice

of PM All Acts passed by two main houses of Parliament

will be examined before made into law Act as head of Judicial Authority and has right to

appoint Chief Justice, Federal and High Court judges as per Federal Constitution and advised ofPM

Given privilege of pardoning wrongdoers and civiloffence committed in Federal Territories andoverride sentences passed out by Military Court


8/13/2019 ACW 420- TOPIC 2

15/49

Power of YDP Agung .. cont Any proceeding against YDPA be brought to a special court under Sec. 182(2) FC. The highest commander of armed forces in the country Head of religion in the states which do not have Sultan Has the power to override and pardon offences any sentences passed out by

Syariah Court Highest honour and privilege of giving awards, order of politeness and others Any proceeding against YDPA be brought to a special court under Sec. 182(2) FC. The highest commander of armed forces in the country Head of religion in the states which do not have Sultan Has the power to override and pardon offences any sentences passed out by

Syariah Court Highest honour and privilege of giving awards, order of politeness and others


8/13/2019 ACW 420- TOPIC 2

16/49

The roles and powers of maininstitution

Ruler Council Setup with the formation of the Federaion of Malaya in

1948 Based on the Malay struggle against the Malayan

Union Main objective is the development of the country and

the people and protect the interest and status of rulers Represent by Rulers/Sultan of the nine states and Yang

DiPertua Negeri(Gavenor) of Malacca, Penang, Sabahand Sarawak


8/13/2019 ACW 420- TOPIC 2

17/49


Role of Council of Rulers Tied to interests of the Malay Rulers and religion Administrative affairs of the country Article 38[2] FC stated:

Selection of YDPA and his DeputyApprove of disapprove any law and gives advice on whateverappointment that requires approval or consultations of the Councilunder FC

Appoints members of the Special Court Section 1 Article 182Grants pardon and postpones sentences under Section 12 Article 42Consider matters relating to national policies eg: amendments to theimmigration policy etc.


8/13/2019 ACW 420- TOPIC 2

18/49


LEGISLATIVE POWER (Art. 44 FC)

legislative power for federal govt. is under Parliamentwhich consist of YDPA and 2 council (Senate and House ofRepresentative)

legislative power for state govt. is under State LegislativeAssembly

power to make laws or to amend existing laws.

to levy taxes or to change existing taxes

to sanction expenditure of public money

to approve budget


8/13/2019 ACW 420- TOPIC 2

19/49

Legislative .. cont The Ninth Schedule of the FC stated:

Legislative power is shared between Federal and State Government Systematically distributes it in a Federal List, State List and a

Concurrent List Federal list covers the areas of:

External affairs, Defense Internal security Civil and criminal law Citizenship Finance Commerce and industries Shipping Communication Health and labour


8/13/2019 ACW 420- TOPIC 2

20/49

Legislative .. cont States List covers areas of:

Land Agriculture Forestry Local government Muslim law Several others

Concurrent List covers areas of: Governed by both Federal and State Government

Social welfare Scholarship Wildlife protection Town and country planning Any disputes, Federal law takes priority


8/13/2019 ACW 420- TOPIC 2

21/49

The roles and powers of maininstitution ..cont

Power of Executive (Art. 39-40 FC)

Power to govern the country

In Federal the power is in the hand of YDPA

In State the power is in the hand of The Ruler

Both delegate their power to cabinet/exco

Power to formulate policies Policies implemented by govt. administrative

agencies.


8/13/2019 ACW 420- TOPIC 2

22/49

The roles and powers of maininstitution .. cont

Judicial Power (Art.121-130 FC)

power to hear and determine whether a person hascommitted a crime and the appropriate sentence

interpret the legality of any legislative and executiveacts

Head of Judiciary is the Lord President of FederalCourt

the constitution gives Judicial power exclusively tofederal court, court of appeal & the 2 high court

judges.


8/13/2019 ACW 420- TOPIC 2

23/49

Law framework and accountingstandards

Government deals with a very large sum ofmoney and a complex structure of operation

They are only a steward not the owner There for, the need the system that enable

them to control, monitor, and providesinternal and external assurance to their

stakeholders. This can achieve through rules and regulation


8/13/2019 ACW 420- TOPIC 2

24/49

The Purpose of Rules and Regulationin PSFM

LEGALITY

Meets the legal requirement

CONTROL TOOLS

All resources and expenditures (money and property)

PROTECTION

Avoid from misused, fraud, waste, divertion, etc


8/13/2019 ACW 420- TOPIC 2

25/49

Needs of rules & regulation

Diverse of government objectives Large amount of annual expenditure at all

levels to ensure accountability of public money to take care of public interest

to ensure objectives are achieved


8/13/2019 ACW 420- TOPIC 2

26/49

Hierarchy ofLegal Provisions, regulations and standards

Federal Constitution, 1957 The Acts ((FPA, 1957, AA, 1957, LGA, 1976,

SBA, 1980, FRA, 1997) The Regulations (TI, TC,TCL) Accounting Standard (FRS, MASB, PPK,

ISA, IAS, GASB, IPSAS)


8/13/2019 ACW 420- TOPIC 2

27/49

Relationship between Constitution, Act andFinancial Regulation

Federal Constitution is too brief. (mandatory and haveto be complied) The other related Acts (FPA, AA, LGA, etc) are made to

give more detailed interpretation and explanation ofthe sprit of FC (mandatory and have to be complied)

Treasury Instructions gives even more detailedexplanation regarding the public finance as general(mandatory)

Treasury Circulars and Treasury Circular letters aredetail explanations regarding a certain matter for dayto day operation in a particular year ( mandatory) Federal Constitution does not dictate everything indetail. (mandatory and have to be complied)


8/13/2019 ACW 420- TOPIC 2

28/49

Legal provision

Federal Constitutions, 1957 In Malaysia the constitution is known as Federal

Constitution and becomes the basis in makingnew law.

All other laws must be consistent with the

constitution The supreme source of legal and the mostimportant

All the other law and regulation must beconsistence with the FC

Provides a basic and important requirement forFG financial aspect (Part VII) (Article 96 112)


8/13/2019 ACW 420- TOPIC 2

29/49

Federal Constitutions, 1957 Main financial requirement stated in FC:

Procedure to collect revenues (Article 96) Accounting requirement (97) Financial reporting and budgeting (99) Withdrawal of the public money (98,100, 101,102, 103,

104) Auditing (105, 106,107) Responsibilities to state government (108,109, 110) Power to make borrowing (111, 112)


8/13/2019 ACW 420- TOPIC 2

30/49

FC .. cont

Summary Flow of Financial requirement in FC


Make law to collect the Revenues (96)

Create CF To Record Revenues (97)

Proposed budget to withdrawal the money from CF (98, 100, 101,102, 103, 104)

Audit the annual financial statement (105, 106, 107)

Prepared the annual financial statement for CF (99)

Approved by the legislative and published the FS

8/13/2019 ACW 420- TOPIC 2

31/49

FC ..cont

Others requirement Grants for States (109) Federal shall make to each state a grant, capitation grant State Road Grant for maintenance of state roads Parliament may vary rate of capitation grant, but if reduce,

it should not be less than 90% of the previous years Federal shall create State Reserve Fund and make grant forState development purpose

Assignment of Taxes and Fees to the States (110) Each state will receive portion of taxes collected

within the states Each state will receive 10% of export duties of mineral

produced by states


8/13/2019 ACW 420- TOPIC 2

32/49

FPA, 1957 Specific act that interpret and explain the financial

requirement stated in FC Provides guidance for;

Control and management of public finance forMalaysia

Provides a financial and accounting procedure forcollection, custody and payment of public moniesand procedure for purchase, custody and disposalof public properties

Provides authority for the investment of moneystanding in the consolidated funds

To enforce provisions of the Federal Constitutionrelating to finance


8/13/2019 ACW 420- TOPIC 2

33/49

FPA, 1957 ..cont

Main content of FPA Interpretation of Terms (Part I: Section 3 )

- Duties of Accounting Officers (Part II: Section 4)

- Control and Management of Public Finance (Part 3:Section 6- 21)

- State Financial & Accounting procedure


8/13/2019 ACW 420- TOPIC 2

34/49

FPA, 1957 ..cont Section 3 Interpretation of Terms

Accounting officer Bank Consolidated Fund Enactment

Financial authority in relation with federal State financial authority Financial year Legislature Menteri Besar or chief Minister

Public money Public service of Federation Public stores State accounting officer


8/13/2019 ACW 420- TOPIC 2

35/49

FPA, 1957 ..cont

Control and Management of Public Finance The Federal and state keep separate ConsolidatedFunds and are managed differently

Federal Consolidated Fund is managed by the

Federal Minister of Finance At State level, it is managed by the State Financial

authority


8/13/2019 ACW 420- TOPIC 2

36/49

FPA, 1957 ..cont Consolidated Fund Account

Consolidated Revenue account to keep all money exceptloans and trusts

Consolidated Loan Account to keep all moneys receivedby way of loan

Consolidated Trust Account to keep all money receivedsubject to a trust and to be applied in accordance with theterms of the trust

Contingencies Fund-Created by Article 103 of the Federal Constitution- Money in this fund shall be applied by the Minister tomeet urgent and unforeseen need of expenditure forwhich no other provision exists-Amount used must be replaced by a supply Bill


8/13/2019 ACW 420- TOPIC 2

37/49

FPA, 1957 ..cont

Payment of Money No money shall be withdrawn from the Consolidated fundsexcept in the manner as provided by this section

By warrant approved by Minister to meet for chargedexpenditure

By warrant to meet expenditure appropriated by a Supply Act,or as authorised by Article 102 of the Federal Constitutions

Money in Trust accounts only for the purpose of trusts Minister has power to limit or suspend any expenditure

authorised Warrant issued for any year shall lapse at the close of one

calendar month following the financial year


8/13/2019 ACW 420- TOPIC 2

38/49

FPA, 1957 ..cont Estimates and Virement

The estimates are required to show clearly divisions and sub-divisions of every purpose of expenditure

The estimates should show as nearly as possible the amountexpected to be received or spent during the year

The estimates of expenditure in respect of any financial yearshall show purposes and subdivision of such expenditure

Estimates of personal emolument should show approvednumber of public offices for each purpose of expenditure No addition to public offices (position or alteration of rate of

personal emolument under any purpose of expenditure maybe made without prior approval of Treasury/Chief Minister

Virement or transfer of allocation between subheads withinthe same head is allowable but with prior approval fromTreasury/state financial Authority

Supplementary budget should be prepared after all possiblevirements have been made

Restriction no virement from personal emoluments


8/13/2019 ACW 420- TOPIC 2

39/49

FPA, 1957 ..cont Controlling Officers

Ministers of Finance or the Chief Minister may appoint aControlling officer in respect of each purpose ofexpenditure

A Controlling Officer is the chief accounting officer for eachpurpose of expenditure

He is to control the authorized estimates for that particularpurpose

Also for all public money collected, received, held ordisbursed, and all public stores received, held anddisposed

He should secure proper exercise or performance of his

duties He is also required to report to the appropriate ServiceCommission and financial authority every event of possiblesurcharge arises or occurs under his control


8/13/2019 ACW 420- TOPIC 2

40/49

FPA, 1957 ..cont Statement of Accounts

Section 9 of the Audit Act 1957 requires the financial authority ofFederal and State at the end of each financial year to prepare:- Statement of Consolidated Revenue Account showingpurposes and subdivisions of the:

amount expected to be received and spent for the yearamount actually received and spent during the year

-Statement of Consolidated Loan Account showing receiptsand expenditure of loan money Receipts and expenditure of Consolidated Trust Account Statements of accounts of funds created by Federal

Constitution not included in Consolidated Trust Account Statements of assets and liabilities of the Federal and States

showing the manner the assets are invested or held, thepurpose of the outstanding liabilities Those statements, after they have been examined and

audited by the Auditor General, should be presented to thelegislature


8/13/2019 ACW 420- TOPIC 2

41/49

Local Government Act, 1976

Act that spesifically bound all the LGs inpeninsular Malaysia only

Provides a detailed about: Sources of revenues for LG (sec. 39) Accounts and Audit (Part V; sec.53 61)

(For detailed please refer to the LG Act, 1976)


Audit Act 1957

8/13/2019 ACW 420- TOPIC 2

42/49

Audit Act, 1957

In FC, there are 3 articles related with theaudit: Article 105 Appointment & remuneration

Article 106 Power and duties Article 107 Reports of AG (Detailed will be discuss in the audit topic)


8/13/2019 ACW 420- TOPIC 2

43/49

Statutory Bodies Act, 1980

An act that provide the requirement for preparationand submission of the statements of accounts foraudit of all the statutory bodies incorporatedpursuant to the provisions of the Federal Law.

Main content:

Interpretation (section 2) Application and construction (Part II; sec. 3-4) Audit of accounts (Part III; sec 5-6) Submission and tabling of accounts and reports (Part IV:

sec 7-8) Extension of time limit (Part V; sec 9) Miscellaneous (Part VI; sec.10- 11)


8/13/2019 ACW 420- TOPIC 2

44/49

Financial regulations

Regulations refers to any instruction/guidelines/circulars provides and approved by thedepartment

Treasury Instruction A regulation provided by the treasury for the purpose of day to

day operation Explain the procedure regarding the collecting, holds and

payment of public money and procedure for purchase, holdsand disposes of public stores

The content of TI consist of: Financial Procedure (power and authorise to made the expenditure

and procedure for virement and supplementary and excessexpenditure) Accounting procedure (collecting, holds and payment of public money

and procedure for purchase, holds and disposes of public stores) Auditing procedure (Audit, Loss and write-off)


Financial regulations cont

8/13/2019 ACW 420- TOPIC 2

45/49

Financial regulations ..cont

Treasury Circulars Circulars provided by the treasury to deal with the

current financial requirement policy Current and detailed guideline related with the

financial aspect like budget format, financialstatement etc.

Eg. TC no. 5/2004 code of accounts TC no. 15/1994 Reporting format of

statutory bodies


8/13/2019 ACW 420- TOPIC 2

46/49

Accounting Standard

Standard published by the accounting body Normally dealt with the reporting format and

disclosure requirement Voluntary in-term of applicability, subject to

the rules and regulation Normally adopt by the government agencies

which have an autonomy power and practice

accrual basis accounting. Eg. MASB, FRS


8/13/2019 ACW 420- TOPIC 2

47/49

Accounting Standard ..cont

Adoption of AS must be not contradict withthe Rules and regulation.


8/13/2019 ACW 420- TOPIC 2

48/49

Conclusion

This topic provides detailed about: Structure, power and administrative

government system

Rules and regulation that need to be followedand complied by the government especiallywhen dealt with the public fund.


8/13/2019 ACW 420- TOPIC 2

49/49

Tutorial Questions

1. What is the autonomy power and describes the FIVE (5)areas of autonomy power enjoyed by the state governmentin Malaysia as prescribed by ninth schedule of FederalConstitution, 1957.

2. Identify five main components of the Malaysian governmentsystem and describes the power or roles each of them.

3. Describes the purposes of the treasury circulars no. 5, 2004and no. 2, 2009.

4. Q 1 & 9, Topic 2, pg. 45 and Q 1&7 Topic 3, pg. 59

acw 420- topic 2

Documents