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CHAPTER 10

FINANCIAL REPORTING IN PUBLIC


SECTOR
Nur Faraeryni Binti Zaidi
Nur Hamizah Binti Abu Azam
Rifky Kesuma Bin Suherman
Mohd Azwan Bin Mohd Noor Hisham
Nurul Ain Syafikah Binti Anuar

4141003951
4134008651
4141002131
4141002641
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INTRODUCTION

The financial condition of a government is its financial health


as measured by sustainability, vulnerability and flexibility,
looked at in the context of the overall economic and financial
environment.
Research Report ,CICA(1997)

Financial reporting is essentially a process of communication


of financial information, whereby elected officials need to
make informed choices about how to use their government
limited resources to best serve the interest of taxpayers.

It is also provides the accountability about government


finances and how they have used the resources that taxpayers
have entrusted to them.

Public sector organization is accountable to provide this


information to its respective stakeholders.

REGULATORY FRAMEWORK & PROCEDURES


Financial reporting enforces the provisions of the FC,
FPA 1957, Treasury Instructions and Treasury
Circulars
Legal requirements:
Article 99 (4) of the FC: the assets and liabilities of the
Federation should be shown at the end of the last
completed financial year, the manner in which those
assets are invested or held, and the general purposes in
respect of which those liabilities are o/standing must be
shown in the financial report
Sec 16 (1) of the FPA 1957: the financial authority
shall be the purpose of section 9 of the Audit Act 57,
after the end of every financial year prepare in respect
of that year:
A statement of Consolidated Revenue Account,
A Statement of Consolidated Loan Account,
A Statement of Consolidated Trust Account
A Statement of Trust Account for any trust fund under
Section 10, Financial Procedure Act 1957.
A Statement of Assets and Liabilities if the Federation
or State at the end of the financial year.

Treasury Circular No.4/2007


- the issued for the preparation and presentation of the
Annual Report and Financial Statements of Federal
Statutory Bodies effective for the financial year 2007.

Government Accounting Standard No. 1


- guidelines to standardise government accounting
procedures involve the principles, basis , convention,
rules and regulations in the preparation and
presentation of government financial statement.

Government Accounting Standard No. 2


- It is related to the presentation of financial statements
by the Federal and State Government .

International Public Sector Accounting Standards


- A set by the International Public Sector Accounting
Standards Board (IPSASB). It is a standing board of the
International Federation of Accountants.

LEGAL REQUIREMENTS & PROCEDURES


Objectives as stated in the circular
To further enhance public accountability by proper and

timely preparation of Annual Report and FSs of Statutory


Bodies within the specified time frame
To provide clear and complete picture to meet the demand
for information needs from various users
To facilitate understanding of the SB
To establish uniform acct. std
To standardise the application of Std Acct Principles and
Practices
To provide clear figures on the financial position of the SB
To further enhance the application of acct. std and
preparation of FS.

OBJECTIVES OF FINANCIAL
REPORTING
Compliance

and Stewardship
Basis of Planning
Performance Evaluation
Quality of services
Statement of Achievement
Fact and Figures

Key Accounting Concept For Public


Sector Financial Reporting
Accounting
Concept

Application in Public Sector

Entity

Entity concept applies to government as separate


entity

Going Concern

In government accounting,the budget lasts for 1


year only. Any budget excess is not carried
forward for Consolidated Revenue Account.
Nevertheless,any budget excess for Consolidated
Trust Account is carried forward.

Periodicity

Periodicity concept relates to the flow of fund


during budgetary period and budget comparison
until 31 January of the following year.This concept
is applicable to only the Consolidated Revenue
Account.

Key Accounting Concept For Public


Sector Financial Reporting
Accounting
Concept

Application in Public Sector

Accrual

Accrual accounting provides a comprehensive


view of governments assets and liabilities and
of its financial performance and cash flow for
the period under review

Matching

Allocation received for the year is compared with


actual expenditure.

Is

a report of financial position, cash flow,


and financial performance.
Prepared annually by Accountant General
Audited by Auditor General
Presented to the Parliament

Federal Government Financial


Statement

Statement

of Secretary General of Treasury and


Accountant General of Malaysia
Statement of Financial Position
Statement of Cash Receipts and Cash Payments
Statement of Financial Performance
Statement of Memorandum Accounts
Notes to the Financial Statements

Main components of Federal


Government Financial Statements

Shows

amount of cash and investments


held in respect of the three accounts:
Consolidated Revenue Account
Consolidated Loan Account
Consolidated Trust Account

Only

investments held for revenue and


specific trust accounts are disclosed in the
Notes with details.

Statement of Financial Position

Similar

to how Statement of Cash Flow


works, its show the flow of cash whether
it is in hand, bank or transit.
This statements were split into two:
Statement of Cash Receipts
Statement of Cash Payments

Statement of Cash Receipts and


Payments

Shows

the revenue generated for the year


Federal Government revenue comprises of
four main category:

Tax revenue
Non-tax revenue
Non-revenue receipts
Revenue from Federal Territories

Statement of Financial
Performance

Shows

some of the assets and liabilities of


the Federal Government which are not
disclosed in the Statement of Financial
Position.
There are two statements in this:
Memorandum of Assets, which contains
Recoverable loans and Investments
Memorandum of Liabilities, which included
Public Debt and Other Liabilities

Statement of Memorandum
Accounts

Include

further explanations and detailed


schedules of amount shown in the
statement. Its include:
Accounting policies and compliances with law
Federal Government accounting based and its
concepts
Federal Government practices modified cash
basis of accounting
Accounting entities
Financial year
Currency used and etc.

Notes to Financial Statements

Users and their potential uses of


information
USERS

Reasons to use information

Public

Assess accountability of elected officials


Assess whether government is funding oods
and services from current taxes

Members of
legislative and other
governing bodies

Approve budgets
Ensure compliance with legislation
Scrutinize accounts

Public taxpayers,
media, other
commentators

Analyze the ability of government to provide


services in the future
Scrutinize governments economic policies
(particularly fiscal policies )

External user

Assess compliance with budget or modified


budget
Assess trends in financial performance

Other govt.
agencies and
resources
providers

Assess ability to repay debts


Ensure compliance with terms of agreements
Obtain performance information relating to
specific project
Support the conduct and monitoring of fiscal
policy

Govt. managers
Senior
management

Analysis and decision-making at more


disaggregrated level
Overview of the financial affairs of the entity
Assists in improving governments
managements

Primary users of public sector


financial information
Legislators
- involved in approving the budget as well as implementing
new taxes
Government Managers and Executive
- formulates various plans, programmes, activities and
projects for implementation at various levels
Taxpayers
- contribute various forms of taxes to the governments

Government Auditors and Oversight Committees


- to ensure that that public monies are properly spent in various
public sector organization
Investors and Vendor
- to achieve their investments goal, thus the return from the
investments
Employees and Voters
- employees are interested in information about their salary
structure and the strength of their company
- voters are the decision-makers of the ruling governments
Non-Governmental Organization (NGOs)
- they need information on the impact of government policies
on
certain sectors of the society

This

chapter shows the financial reporting


practices of the public sector, with the special
objectives of the Federal Government.
The regulatory framework and objectives of the
financial reporting are also identified and
explained.
The main components of the financial statement.
Public sectors organizations also have various
groups of users of the financial statement with
different needs.

Summary

Questions
1) LIST FOUR MAIN CATEGORIES OF THE FEDERAL
GOVERNMENT REVENUE
2) HOW FEDERAL GOVERNMENT RAISED THE FUND
3) IDENTIFY THE MAIN COMPONENTS OF FINANCIAL
STATEMENT OF THE FEDERAL GOVERNMENT
4) GIVE TYPE OF CONSOLIDATED FUND