CHAPTER 8

CONSOLIDATED
FUND

LEARNING OBJECTIVE

Define fund accounting

Determine the objectives of fund accounting
Identify the characteristics of fund accounting
Discuss
the
regulatory
framework
and
relationship
between
three
types
of
Consolidated Fund
Describe the three types of Consolidated Fund,
namely;
Consolidated
Revenue
Account,
Consolidated Trust Account and Consolidated
Loan Account

LEARNING OUTCOMES
LO 3

Apply the concepts and issues relevant to public

sector accounting and reporting.

INTRODUCTION
What is fund accounting?
The accounting for each fund produces its own
operating statement and balance sheet.
Jones and Pendlebury (2010)

A fiscal and accounting entity with a self-balancing set of

accounts recording cash and other financial resources
together with all related liabilities and residual equities or
balances and changes therein which are segregated for
the purpose of carrying on specific activities or attaining
certain objectives in accordance with special
regulations, restrictions or limitations.
US National Council Governmental Accounting Statement No. 1 (1998)

INTRODUCTION
What are the objectives of fund
accounting?

INTRODUCTION
What are the characteristics of fund
accounting?

REGULATORY FRAMEWORK
OF CONSOLIDATED FUND

CONSOLIDATED REVENUE
ACCOUNT

All types of money or revenue received except for loans

and trusts are to be accounted for in the Consolidated
Revenue Account [ Section 7(a) of the Financial Procedure
Act 1957].

Used to maintain operating expenditures.

CONSOLIDATED REVENUE
ACCOUNT

CONSOLIDATED TRUST
ACCOUNT

Established to account for all receipts and payments

to trust funds and monies received by government
for specific purposes [Section 7(c) of the FPA 1957].

GAS No. 4: Consolidated Trust Account

Comprise of:

Government Trust Funds

Public Trust Funds

Deposits

CONSOLIDATED LOAN
ACCOUNT
Sec

7 (b) of FPA 1957: all monies

received by way of loan shall be kept in
the Consolidated Loan account.

The

loan amount is transferred into the

Development Fund, Housing Loan Fund
or other fund authorised by Parliament,
depends on purpose loan was raised.

GAS

5 of PPK: Consolidated Loan

account issued on Dec 2004 and
effective for financial year 2006

CONSOLIDATED LOAN
ACCOUNT
Main

sources from domestic borrowing (local bank

and financial institutions) and external borrowings
(World Bank and IMF)
Art
111 of Fed Const: legal framework for
government to undertake domestic and external
borrowings.
Parliament has passed 9 laws authorize government
to raise loan : Domestic Loans (Internal Bank
Ordinance 1958, Loans Local Ordinance 1959,
Treasury Bills Local Act 1964 and Government
Investment Act 1983
External Loan Act 1963 (Extended Credit Act 1966,
Development Fund Act 1966, Loans (Asian Dev Bank)
Act 1968 and Loans (Islamic Dev Bank) Act 1977

CONSOLIDATED LOAN
ACCOUNT

CONSOLIDATED LOAN
ACCOUNT
Malaysian Government Securities
Bonds issued on long term basis to
finance Federal Government Expenditure
Registered stocks available to the market
by tender and managed by Bank Negara
Major subscribers: Petronas, EPF, BSN
Treasury Bills
Short term loan issued periodically to
finance the redemption cost of matured
bills
Major subscribers: commercial banks and
discount houses

CONSOLIDATED LOAN
ACCOUNT
Government Investment Issues
Issued

based on Islamic principles to

complement measures in controlling
excess liquidity in the financial system

Major

subscribers: Bank Islam and other

interest free financial institution

Sukuk
-

Islamic equivalent bonds

CONSOLIDATED LOAN
ACCOUNT

External
Borrowing

CONSOLIDATED LOAN
ACCOUNT
Loans

obtained with limits of borrowing based

on External Loan Act 1963, the ceiling under the
Act is RM30 billion

Market Loans
Loans

obtained from international financial

institution, which negotiated at common market
rates raised for general purpose

Syndicated

Loan: group of banks that provide

loans and the interest payable based on the
floating rate basis of LIBOR, YEN or SWISS
FRANC

CONSOLIDATED LOAN
ACCOUNT
Bond

Issues: Loan from the government in Tokyo,

Frnkfurt, Amsterdam and Zurich

Floating

Rate Notes: external loans where the

interest payable is based on Floating Rate and has
a maturity period between 10 and 30 years

Project Loans
Borrowings

in terms of money, services and

technical studies, which are secured for specific
development projects

Obtained

from multilateral (World Bank, Asia Dev

Bank, Integrated Dev Bank, and bilateral (govt to
govt basis :Msia and Japan.