Anda di halaman 1dari 20


















The Outcome Based Budgeting implementation in

The Accrual Accounting in Malaysia


Activity Based Costing in Malaysia



The Public Sector Data Dictionary (DDSA)



Evolutions of the Public Sector in Malaysia










Assalamualaikum WBT,
First of all, we would like to thank Allah Swt as we manage to finish this case
study on time and make us believe that anything is possible.
The special thank goes to our beloved lecturer, PM MAHUSIN BIN CHE KOB for all
the knowledge, support that she have gave to all of us which truly help the
progression and smoothness of this study case. The co-operation is much indeed
Our grateful thanks also go to all of our group members for all the cooperation
and hard work in doing this study case. All works during the period that we work
together would be nothing without the cooperation and enthusiasm from the
group members. During that period, its really brought us together to appreciate
the true value of friendship and respect for each other.
Great deals appreciated go to the contribution from our lovely classmate,
AC2204B for their supports and help us in completing this study case.


Malaysia can be classified as a developing nation on the rise due to
various transformations endured throughout the years ranging from every
significant aspects of administration, financial, and economical which bloom
from time to time thus attracting many foreign direct investments to be set up
here. But, the main focus is on the financial point of view or to be more specific
it is regarding the public sector accounting in Malaysia which had gone through
rigorous changes throughout the times.
So, accounting entity concept can be defined as the entity view of an
organization is that it is distinct from any group of individuals associated with it.
The business is considered to be a complete entity where all the business
transactions are a separate entity. Referring to the definition above it can be
relate to the concept of public sector accounting which means the government
is viewed as a separate entity and the main objectives of the public sector are to
serve the public, comply with legislative requirement and certainly not to make
profit. These are some example of governing laws and regulations of Malaysia
which are the Federal Constitutions, Financial Procedure Act 1957, Treasury
Circular and Government Accounting Standard.
Besides, public sector accounting focused on all the accounts of all kind
of government agencies and the person in charge of auditing and assessing all
the accounts are the Auditor General of Malaysia. The Auditor General is
bestowed undisputed power to carry the audit to ensure that all the allocations
of public money are being utilized for the benefit of the public thus increasing
the accountability and integrity in every government agencies available.
Moreover, the accounting system in Malaysia is based on cash basis and it is
monitored by the Accountant General to ensure smooth preparation of all the
disbursement of federal money and also to prepare the annual financial
statement to be tabled down at the parliament.
Even though, Malaysia has these various regulations and systematic
accounting system, she is still far beyond the reach of other developed nations
in term of basis of accounting as many had already implemented the accrual
basis system as it more efficient in terms of setting the fiscal policy of the nation

itself. So, analysis on the current accounting system and soon to be adopted
system is carried out to compare the benefits of both of the system as it will
give out clear views on the development of the accounting system in the public
sector thus strengthening the slogan of People first, Performance now created
by the government to woo the public hence increased the governance of all the
government accounting standards.


Currently public sector accounting in Malaysia used three different basis
of accounting that are the modified cash accounting, modified accrual
accounting and accrual accounting.
So, the first basis that is the modified cash accounting where the transactions
and other events are recognized on a cash basis during the year. Any unpaid
accounts and receivables are taken into account for a month after the year end.
The components of the public sector that practiced this basis are the Federal
and State government in Malaysia.
Then, the second one is the modified accrual accounting basis which
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. The local
government and Islamic Council of Malaysia used this basis to record all of their
revenues and expenditures that incurred.
Last but not least, the third one that is the accrual accounting basis where
economic events are recognized when they occur regardless of when cash
transactions occur, meaning economic events are recognized by matching
revenues to expenses at the time in which the transactions occur rather than
when payment is made or received. The statutory bodies are popular in
implementing this basis to record all of their transactions. But, majority of the
government agencies used modified cash basis and this shows that Malaysia is
still retrogressive in implementing more reliable and efficient system of

accounting compared to other developed nations in form of United Kingdom,

United States of America and EU.
It is appropriate to be said that there are limitations to the system of cash
modified basis used in Malaysia and it is also correct to said that the
government must improvised the accounting system to ensure that
accountability and transparency of the utilizations of the public money increases
and clear out any doubts on the Federal government itself. The public cum
taxpayers would be more satisfied to know how well government utilized the
money and thus providing the best infrastructures and development to be
enjoyed by the society as long as possible.


There are limitations of the modified cash basis and the first one is that
this basis is simpler but the concept is unfamiliar because the consolidated fund
is by law a-cash account regulating the flow of cash receipts into and cash
payments out of the fund. Revenues are also reported on a cash basis and
therefore accruals are not recorded in the government accounts as "accounts
receivable". So, it can create many discrepancies as the system used is too
isolated from the norm of government accounting standard used from the
colonial days till present days.
Then, moving on to the second limitation that is the ease of manipulation
where the data are easily manipulated as all the unpaid is recorded a month
after the year end, so during the recording of the data, some irresponsible
parties are able to manipulate all the figures and thus causing the amount of
recorded expenses to be more than expected or budgeted in the particular year
due to the greediness of the parties that only looking out for their own interest
rather than serving the public with the best interests.
Moreover, the third limitation of this basis is that it is less comprehensive
as it only shows the cash information. As we all know, a meticulous set of
information must be collected to ensure that the allocation of resources is
disbursed efficiently and also all type of aspects must be analysed so that the

cash used for paying the expenses is not misused by any parties. Besides, the
basis also only provide basic information and the commitment information are
not available. Without the best available commitment, the planning and
allocating of budget transfer cannot be fully utilised and soon ensuring that
there are sufficient funds are available to meet contractual needs.
Other than that, the implementation cost is higher and costly because of
the customization and limited availability so it can be a liability for the
government to implement this basis as it will increase more expenses thus can
increase the public debts and so increase the deficit for the year. Consequently,
it will affect the lives of the public and put the government in critical stage to
save the economy before it is dragged into debt crisis such as the ones
experienced in Italy, Greece and Spain. There are also deficiencies and one of it
is the lack of information for the non financial asset management as once again
the basis only focused solely on the cash information and other non financial
information are ignored and it may affect the judgement to implement the best
fiscal policy for the country itself.

Other than that, the factor of limited credibility and accountability is

another limitation of the modified cash basis. This can be said that even the
rating agency cannot successfully rated all the agencies as the information
received and collected are safeguard mainly by the government which can be
tampered anytime by the irresponsible parties to ensure that all of their ill
doings cannot be traced and also still using the public for their own greed and
interests. A credible system of watchdog must be implemented to increase the
accountability of all the agencies and also the related parties involved.
Besides, there is also the factor of limited basis for determining the fiscal
strategy of the country effectively and economically. As we all know, fiscal
policy plays an important part in budgeting and also reducing the public debt of
the country, so the modified cash basis only focused on the cash information
only, so it is unlikely that a formidable and credible plan can be created and
utilized for the benefits of the nation as the information are so limited.
Moreover, limited product and service pricing will affect the decisions made to


record all the expenditure and revenues effectively as it only focused generally
and not specified on each of the information in which the payment was made for
and how much or too who it was paid for. The information on these matters are
the key to a successful financial plan and give confidence to the public to
support the government when financially it is stable and are able to resolve any
Last but not least, the disincentives for fraud and corruption are limited
and this surely attracted the irresponsible parties who are only interested in
gaining all benefits from the system to ensure the survival of continuous gains
and income from the system that supposedly to help the nation in serving its
people instead of becoming a cash cow for the financial culprits. Such examples
can be seen in the fiascos regarding the Perwaja and Sime Darby Bhd when
there is too little disincentive to deter fraud, that could make the government
paid the price for not taking more stern actions to the perpetrators.


Different components of the government used different accounting
standards. So, the federal and state component of the government used the
standard of International Public Sector Accounting Standard ( IPSAS) which
mainly are based on cash basis and also the Government Accounting Standards
( PPK) which had been implemented since early year of 2000.
The Malaysian government introduces the New Economic Model to
enhances the per capita income of in Malaysia by 2020, so as the result from

the inception of the new policy, it is used to advocate the for the adoption of the
international standard for fiscal transparency as the way towards proper
assessment and dissemination of public solvency and sustainability, plus
Malaysia is the first country to apply the cash basis IPSAS. The application of the
requirement of IPSAS will improve both the quality and comparability of financial
information reported by public sector entities. Thus, this will enhance
accountability and transparency of the information.
Then, moving on to the Government Accounting Standard (PPK) is applied
to ensure that it is used during the preparations of the financial statement such
as required by the Federal Constitution and Financial Procedure Act 1957. It is
used as a guideline to standardize all the elements in the government
accounting and covers everything such as the principle, rules and procedure in
that are accepted in order to present the financial statements of the
government. It can be summed up that both of the rules and obligations
required by the Federal Constitutions and Financial Procedure Act 1957 are to
ensure that any discrepancies can be deter out from the financial statement of
the government hence showing that the sense of accountability and
transparency played major part in all the agencies of the government. Then, the
government are able to allocate the best possible resources to all members of
the public as the best policy can be implemented trough reliable and believable

The other parts of the government of Malaysia that are the local
government, statutory bodies and Islamic Council used the elements of
International Financial Reporting Standard (IFRS)
(Requirement for Securities Commission and Bank Negara), Private Entity
Reporting Standard (PERS), and also Malaysian Accounting Standard Boards
(MASB) .

International Financial Reporting Standard (IFRS) are principle based

standards; interpretations and the framework adopted by the International
Accounting Standard Boards and it are used as the assessor of the financial
statement so that they should reflect the true and fair view of the financial
position of the organization or government in this context.
While, the Private Entity Reporting focused on by the statutory bodies as
they are jointly controlled by an entity which is required to prepare or lodge any
financial statements under any law administered by the Securities Commission
or the Bank Negara Malaysia.
Then, moving on to the Malaysian Accounting Standard Boards ( MASB)
which is established under the Financial Reporting Act 1997 (the Act) as an
independent authority to develop and issue accounting and financial reporting
standards in Malaysia. The MASB, together with the Financial Reporting
Foundation (FRF), make up the new framework for financial reporting in
Malaysia. This new framework comprises an independent standard-setting
structure with representation from all relevant parties in the standard-setting
process, including preparers, users, regulators and the accountancy profession.
The MASB's mission is to develop and promote high quality accounting and
reporting standards that are consistent with international best practices for the
benefit of users, preparers, auditors and the public in Malaysia. The board is the
prominent figure in the accounting profession in Malaysia as they are the ones
who issue new accounting standards as approved accounting standards and to
review, revise or adopt existing accounting standards as approved accounting
So, it can be concluded that the accounting standards in Malaysia are still in the
process of transitions and should be in its best in the coming year. But, all the
standards are internationally qualified and will help the government of Malaysia
to provide the best presentations of financial statements and can assist in
budgeting process of the nation itself as it provide the assurance on the
information and procedure used to publish the financial statements.



The different components of the government in Malaysia are
distinguished from applications of the different structure of accounting system.
Example of the known accounting systems in Malaysia are Government Financial
and Management Accounting System (GFMAS), State Governments Standard
Computerised Accounting System (SPEKS) and also Standard Accounting System
for Government Agencies (SAGA). Practically, the Federal government of used
the Government Financial and Management Accounting System (GFMAS) and it
was implemented during the year 2001, to replace the old system of Branch
Accounting System (BAS). It was to enable the government to operate on an
accrual accounting replacing the current cash basis system, it is a new system
implemented in the Accountant General Department to enhance the
effectiveness in the management of the governments accounting system.
The objective of Government Financial and Management Accounting
System (GFMAS) is to integrate all the AGD accounting systems in order to
provide accurate, quality and timely accounting data and information for
effective and efficient decision making amongst government managers. The
integrated features of GFMAS are capable of allowing the acceleration in
financial planning, budget control and government accounting. Other than that,
The GFMAS was developed by using web enabled system which enables it to
integrate with other government systems such as e-SPKB and e-Terimaan.
Moving on to the State Governments Computerised Accounting System
(SPEKS) which is the integrated accounting system developed specifically for the
state governments in Peninsular Malaysia. The development and
implementation of SPEKS were successfully completed in 2005. The pilot phase
implementation involving Kedah and Perlis was completed on 30 April 2005. This
was followed in the completion of Roll-out phase for Johor, Melaka, Negeri
Sembilan, Selangor, Perak, Pulau Pinang, Kelantan, Terengganu and Pahang on
31 July 2005. The objectives of the system are to increase productivity and
efficiency in financial management, improving states financial administration
and also to prepare the state government for the Electronic Government Era.
This show that the implementation computerized accounting system in the state
10 | P a g e

government can produce more effective management especially on the financial

aspect thus providing the best data to be collected by the Federal government
in planning the budget.

Then, another brilliant system is the Standard Accounting System for

Government Agencies (SAGA). It was announced by the cabinet in September
1994 and this package is specifically for use by the statutory bodies. The
issuance of Development Administrative Circular No. 1 of 1996 has set a
landmark for the government to encourage the use of computerized accounting
systems in the preparations of financial reports. However, a few improvements
have been made to the earlier version of SAGA package after the AGD was
elected as the new lead agency heading the implementation of the SAGA
expansion projects in 2004 from MAMPU. The aim of the SAGA is to ensure the
accounts of the statutory bodies are being updated daily and submitted in time
for auditing purposes. SAGA is a web based financial solution that will enable
efficient processing of financial information at the both operational and
management level of an organisation in particular the local government
agencies. It is easily accessible, flexible, efficient and reliable to meet todays
demand for information.
The following statutory bodies have prepared their accounts and financial
statements for the year ended 2006 using the SAGA package:
1. Kolej Universiti Teknologi Tun Hussein Onn (KUiTTHO)
2. Perbadanan Harta Intelek Malaysia (MyIPO)
3. Lembaga Akreditasi Negara (LAN)
4. Lembaga Kemajuan Pertanian Kelantan (KADA)
5. Universiti Malaysia Sabah (UMS)
6. Lembaga Penduduk dan Pembangunan Keluarga Negara (LPPKN)
7. Balai Seni Lukis Negara (BSLN)
8. Lembaga Tembakau Negara (LTN)
9. Maktab Kerjasama Malaysia (MKM)
11 | P a g e

10.Lembaga Pembangunan Wilayah Pulau Pinang (PERDA)

11.Lembaga Kemajuan Johor Tenggara (KEJORA)

PKPA Bil 1/2007 VS PKPA Bil 1/2011

Definition of SAGA

Scope of work

PKPA Bil 1/2007

Standard Accounting

PKPA Bil 1/2011

Accounting package

package approved by

available in the market


Which can be customized

Not mentioned

according to the GAAP

System architecture must
be approved Accountant

Structure of corporate

Not disclosed

General Department

Post implementations

Not mentioned

Agency and Ministry level

Implementation of

Federal Statutory Bodies

Federal Statutory



Bodies, State Statutory

Bodies, Local Authority
and Islamic Council

12 | P a g e


The Outcome Based Budgeting implementation in

The outcome based budgeting revolved around the best formulated

budget to ensure the optimal allocation of resources to meet the policy
target. Basically, it is to ensure the focus on the vision, mission and strategy
of the government to ensure the best applicable budgeting system for the
public to enjoy. The OBB focused on the management information system,
performance monitoring and also evaluation, it integrated the national plans
to achieve the long term objectives.
In addition, the national programs are needed to achieve the integrated
national plans and all the ministerial programs are linked to complete the
national programs. In order to complete the programs, activities have to
planned and best so that it can be the best possible alternatives to serve the
public. Regarding the activities, all of it is under the ministrys program
under the Modified Budgeting System and when the country decided to
adapt or converted to accrual accounting basis it set as the platform for the
implementation of the OBB. The alignments of programs are with the
National thrust and Key Areas Results. The OBB aims to provide clarity and
13 | P a g e

present a holistic view of programmes and activities that are systematically

aligned to the national development framework. The Government will
improve the structure of budget allocation and expenditure to be more
efficient and effective.
Accordingly, the Outcome Based Budgeting (OBB) system will be
developed in 2010. This system will be implemented during the 10MP period
to replace the existing Modified Budgeting System. Under the OBB approach,
emphasis will be given to the impact and effectiveness of projects and
programmes, compared with expenditure and output. In addition,
Government expenditure will emphasise value-for-money as well as
programmes and projects with high multiplier effect.

The Accrual Accounting in Malaysia

The Malaysian government had long used the cash basis accounting and
recently under the new transformation and also under the New Economic Model
to converted the system of using cash basis into accrual accounting. The
decision of the government to migrate to the accrual accounting has been
stipulated as a policy measure in the New Economic Model. If the adoption of
the accrual accounting successful, it will took Malaysia in par with the
developing nations such as the United Kingdom and United States of America
and also completed the aspiration of the government of attainting the develop
nation status by the year of 2020.
Accrual accounting is an accounting method that measures the financial
performance and financial position of an entity by recognising the effects of a
transaction or event as it occurs, and not as cash or its equivalent is received or
paid. Under the accrual basis of accounting, the effects of transactions or events
are recorded in the accounting records and reported in the financial statements
of the periods to which they relate.
Accrual accounting is typically defined by way of contrast to cash accounting.

14 | P a g e

Financial statements prepared on the accrual basis inform users not only of past
transactions involving the payment and receipt of cash but also of obligations to
pay cash in the future and of resources that represent cash to be received in the
future. As the accounting system enshrined in the accounting standards, accrual
accounting has long become the standard accounting practice in the private
sector. Given the emphasis of business enterprises on profitability, the
relevance of accrual accounting in the private sector is rarely challenged. No
doubt, accrual accounting is generally more reliable than cash accounting in
measuring financial performance. The outcome of the accrual accounting is to
enable more efficient and effective fiscal policy on the Key Areas Result and it
also can provide many benefits to the public sector.
The first reason is that it can enabled the costing of data of output to be
more effective thus the evaluation of alternatives also became more efficient to
achieve the outcomes hence in return can be called as cost savings for the
government. Besides, the information on all the assets can provide and facilitate
unlocking values which can generate the revenues deriving from all the assets
owned. Other than that, the asset listings also provide the database for
infrastructure management which then leading to the better assets
maintenance hence providing better service delivery for the public.
There are also other benefits of the accrual accounting such as the better
level of accountability and sustainability, better measure of policies effect and
promote greater integrity.
The level of accountability will be increased using the accrual accounting as it
improve the performance and financial management of the agency and also it is
perfect as it is called as the accounting for consumption resources.
As for the level of sustainability, it can facilitate the management of all
the revenues of all government agencies and also it promotes the
intergenerational equity of public policy which can help to give greater
transparency of the policies created by the government. The policies then can
be measured accordingly to check on its level of effectiveness thus
complimenting the results framework of the OBB, when the policies are fairly
scrutinised and assessed, the level of accountability of executive government
also become better.

15 | P a g e

Activity Based Costing in Malaysia

Activity based costing can be defined as the method of allocating costs to
products and services used in the government agencies. It is used as a tool for
planning and controlling the resources available to make sure it are utilized
sufficiently by every department. In addition, the concept also allows the
managers to attribute costs to activities and products, also when the costs can
be identified and passed on to the users only when the product or service uses
the activity.
Moreover, the highly cost of overhead per unit can be identified and
analysed so that the best ways and alternatives can be conjured up to reduce
the costs to ensure the decisions are efficient and economical. Besides that, ABC
can help to facilitate the implementation OBB and also its evaluation as it can
provide the best information to be used in managing the budget and allocation
of the public resources. So, consequently the integration of ABC and accrual
accounting will produce useful information for decision making so that all
agencies are able to provide the best services and products for public to ensure
that the credibility and reputations of the government whether it is from the
financial or administration aspects.

The Public Sector Data Dictionary (DDSA)

What is DDSA?
The term Data Dictionary can be defined as the description of data and it sets
the standard for data description to be used by all the public agencies available
in Malaysia. It is another innovative method to ensure the transformations of the
government in retaining all the available data pertaining to all public resources.
The Auditor General Department is given the task to involve and monitor 4 out
of 11 working groups set up to DDSA and those groups are the department of

16 | P a g e

accounting and finance as the chairman of the programme, data generic, human
resources and project monitoring teams as the members to assist in the
implementation of the system.
Now, the first objective of the DDSA is to ensure the ease of
implementation and also integration of applications systems within and between
the agencies and this will create more reliable and trustworthy operations for all
the agencies. The second one is that it facilitates the exchange of data between
the government agencies and it surely can improve the efficiency of data
sharing among the agencies to ensure the resources can be fully utilized for any
decision making involved.
Besides, it is also assisted all the agencies in the development of
application system thus allow the users to communicate with each other using
the same definition and data. In addition, the DDSA also facilitate the
communications between the public sector and private sector through the use of
standard data definitions, as the government are trying to build the relationship
with private sector in order to maximize the growth of the economy and reached
the target of obtaining the developed nation status in 2020.
The DDSA can help create a framework which can revolutionized the data
available in all the agencies thus can help create the transformation and
modernisation craved by the government in order to pick up pace with the
globalisation and trending of other developed nations in other part of the world.
Without the best possible framework, Malaysia cannot achieve the highly
respected status and lagged in terms of accounting and administrations.

Evolutions of the Public Sector in Malaysia

Modified cash basis
Branch Accounting

Modified cash basis

Accrual basis


IPSAS Cash ( Revised)

IPSAS Accrual
17 | P a g e

Modified cash basis
IPSAS cash

Modified cash basis
IPSAS cash

Accrual basis
SPEKS ( Accrual)
IPSAS accrual

Local government and statutory bodies

Modified accrual basis
Manual, SAGA and Other

Accrual basis

Accrual basis

IFRS, PERS, PKPA 1/2007,

IFRS, PERS, PKPA 1/2011,

IPSAS accrual



It can sum up that the Malaysian government is very serious in reaching
the aspiration of Wawasan 2020 which recognised the country as the developing
nation in par with other European and Asian countries. So, it is appropriate to
say that the implementation of accrual accounting together with the Outcome
Based Budgeting and Activity Based Costing are the right and necessary steps
to revolutionized the public sector accounting and also administratively to
ensure that Malaysia has the best possible options in order to transform every
aspect to ensure the degree of accountability and integrity increased.
18 | P a g e

When the objectives are fulfilled, the level of confidence of the public
towards the government also increased and thus in return attracting the private
sector to join hands to fully support the public sector and consequently can help
Malaysia to fully utilized resources available and also yet to be discovered so
that the wellness of the public can be fully safeguarded.
Hence, when the government are at its best, the amount of economics
deficiencies such as the inflation can be reduced and prevent the country from
being dragged into fiascos such that had already happened in European nations
such as Greece and Spain. So, all parties must support and provide the best
methodology to ensure the objectives of transformation programme are
successful and improvised the nation itself towards developing nation that had
been long hoped for and without commitment and accountability in all parts of
government agencies existed in Malaysia.


Accountants Today


National Accounting Department

19 | P a g e

Ministry Of Finance

Text Book

Public sector Accounting Malaysian Context


External influences on the development and professionalization of

accounting in Malaysia, 1957-1969


The Performance Reporting Practises of Malaysian Federal

Government Statutory Body: Any Evaluation Of Accounting
Development. Saflina Binti Aziz, IIUM (2008)

Accountability practice at Local Government of Malaysia.

Danilah Salleh & Siti Nabiha Abdul Khalid, USM

Malaysia Accounting review, Volume 5 No. 2 (Oct 2006)

20 | P a g e