FARAH BINTI AZIZ

Text book : Chapter 5 & 6

 MICRO
ACCOUNTING SYSTEM
CHAPTER 5 (pg.88)
 is MAS ?
§ Was introduced through the issuance of
Development Administrative Circular No.3 of
1992 issued on 30 July 1992.
§ Is developed on the concept of ABC which
introduced to enhance the efficiency in financial
management as well as public sector
productivity.
§ Is a method / process of gathering, calculating
& analyzing the cost of actual output for each
government’s programme & activities.
§ It is a detail accounting system, which emphasizes
on costing the outputs, namely services &
products of each federal government ministry &
department.
§ Provides a new dimension to help achieve the
objectives of Modified Budgeting System during
1990.
§ Offers a new mechanism towards strengthening
management accounting at the department level.
the implementation of SPM would further
enhance accountability in the public service.
 Ø Facilitate of the information cost collecting,
processing and preparation.
Ø Information prepared on cost efficiently and more
Objectives flexible.
Ø Produce reliable cost
Ø Contribute the optimization resources.

Ø To let the management have an awareness on the cost.

Ø Actual costs and planed costs will be compared.

Benefits Ø Planning process,executions,control and evaluation will

helped.
Ø The changes of component output cost will be identify.
Ø Determine the price for output.
Implementation Strategies
 Ø Set up an SPM steering to monitor the success of each agency.

Implementation Ø Need them to plan, supervise, guide, monitor and coordinate.

Ø Chief Facilitator to supervise the implementation team.
Machinery Ø The selection based on he skill and ability to manage the process.
Ø His responsible to guide and supervise the implementation team,
resolve problem and report to the committee.

Ø The team that implementation need to be trained.

Training Ø Training given 3 difference groups of personnel in agencies >
planning and implementing SPM, data input and data collect.
Implementation Ø Identify the direct costs
Ø Adopted the ABC for the routine and standardized output.
Approach

Follow Up Ø To discuss progress, problem and sharing of experience.

Computerised Ø To trace costs of outputs.

Ø Ability to interface with Budgetary and Planning System,
Implementation Asset Management System and HR Management System.
BUDGETING
CHAPTER 6 (pg.91)

Langfield-Smith, Thorne, & Hilton
“ Budget is a detailed plan that shows
the financial consequences of an
organization operating activities for a
specific future time period. It acts as a
financial model that summarizes future
operations and its usually viewed as a
core component of an organization’s
planning & control.”
is ?
Hilton CIMA
“ Budget is a detailed plan, expressed in “Budget is a quantitative
quantitative terms that specify how expression of a plan for a defined
resources will be acquired and used period of time. It may include
during a specified period of time. The planned sales volumes & revenues,
procedures used to develop a budget resource quantities, costs &
constitute a budgeting system.” expenses, assets, liabilities & cash
flows.”
 oF Budget

Decision Saving
Planning Making Money

Identify
Problem
Use of
Resources
Achieved
Goal
 of Budget
Planning

Communication

Taxation Co-ordination
Fiscal Policy Management
Instrument Instrument
Expenditure Control

Evaluation

Motivation
 FISCAL POLICY :
Ø Is the government spending policies that influence macroeconomic conditions
Fiscal Policy of the country.
Ø Is a measure employed by government to stabilize the economy, particularly by

Instrument
adjusting the government’s expenditures and taxation.

According to John Maynard Keynes that insufficient demand

causes unemployment & excessive demand leads to inflation.

Reducing taxes & spending more

Economy slowed due to recession
than it takes from the economy

Slow down an economy that is

Increase taxes & spending less to
threatened by inflationary
create a budget surplus
pressures
Possible
Positions
Expansion Contraction Neutral

q Defined as an increase in government expenditures and /or a decrease in

taxes that causes the government’s budget deficit to increase or its budget
surplus to decrease.
q Decrease taxes will increase in public spending and it may correspondingly
pump cash into the economy and also expand the economy.
Expansion q Involves a net increase in government spending where government
spending is more than tax revenue which occurs through increases in
government spending or a reduction in taxation revenue or both.
q The budget deficit is financed by government borrowing & the government
issues long-term bonds to proceeds finance the deficit. In addition, the
outstanding interest payment is known as the national debt.
 q Defined as a decrease in government expenditures and/or an increase in taxes
that causes the government’s budget deficit to decrease or its budget surplus to

Contraction increase.
q Occurs when net government spending is reduced either through higher
taxation revenue / through reduced government spending / both.
q The revenues from the budget surplus are normally used to reduce any existing
national debt.

q Implies a balanced budget where government spending is equal to tax revenue.

q Indicates that government spending is fully funded by tax revenue.
Neutral q Therefore, the budget outcome has a neutral effect on the level of economic
activity.
q If the government expenditures are exactly equal to tax revenues in a given
year, the government is running a balanced budget for that year.
 Motivation Planning
Management
Instrument
Evaluation Communication

Co-ordination
Control
 q Planning involves developing objectives and preparing various activities to
Planning achieve the goals.
q In public sector, the planning role is achieved by expressing in monetary terms
the inputs needed to achieve the planned activities.
q It is important because the type, quantity & quality of governmental goods &
services provided are not normally evaluated & adjusted through the open market
mechanisms & they are often the most critical to the public interest.
q Government planning and decision-making is generally a joint process involving
its citizens & legislative & executive bodies.

Communication q Must be a definite line of communication in an organization so that all parts will be
kept informed of the plans, constraints and policies to which the organization is
expected to conform.
q Through the budget, top management communicates its expectations to lower
level management, so that all parties understand these expectations and can co-
ordinate their activities to attain them.
Co-ordination q Budget serves as a useful tool through which the actions of the different parts of
an organization can be brought together and reconciled into a common plan.
q Budgeting compels managers to examine the relationship between their
department’s operations and those of other departments to identify and resolve
conflicts.

q Budget is considered as a control device in governments with regard to

legislative control over executive body, & executive control over government
agencies or departments.
Control q Involves the steps taken to ensure that objectives set down at the planning
stage are achieved and each parts of organization are working together towards
achieving the goal.
q The control role is accomplished when the budget is prepared in such a way that
it shows clearly the inputs & resources that have been allocated to government
organizations to permit them to undertake the tasks for which they are
responsible.
 q Planning is designed to ensure the continuity of programme activities & budgeting
provides definite objectives for evaluating performance at each level of
responsibility.
q Budget acts as a tool for evaluating performance where the budgeted & the actual
figure will be compared which the causes for any variance between the actual &
Evaluation budgeted output can be identified.
q Relevant, accurate & timely reports of actual & budgeted positions need to be
provided to all levels of management to enable performance to be monitored
against the budget.

Motivation q Budget can be a useful device for influencing managerial behavior & motivating
managers to perform in line with the organizational objectives.
q A budget provides a standard that under certain circumstances, a manager may
be motivated to strive to achieve.
National National
Revenues Expenditures

Federal Operating
Revenues Expenditures

State Development
Revenues Expenditures

Local
revenues

Federal Revenues
TAX REVENUE
Direct Tax : income tax,
stamp duty, petroleum
tax, property gain & firm
hire duties.
Indirect Tax : sales tax,
receipts from import & investment locally & abroad,
export duties, service tax
and levy on good vehicles reimbursement from foreign
leaving Peninsular
Malaysia.
ü Revenues earned / obtained by the federal government.
ü According to Government Accounting Standard No.3 ,
federal revenues consists of tax revenue, non-tax revenue,
other receipts.
NON-TAX REVENUE OTHER RECEIPTS REVENUE FROM
FEDERAL TERRITORIES
Repayment of expenditure
This includes receipts from
include interdepartmental
registration payment, These consist of tax & non-
credits, repayment of
licenses & permits, receipt tax revenue collected on
excessive payment and etc.
from sales of goods, rent, behalf of the government.
interest & returns on
Refund of expenditure
These include receipts from
include receipts from
penalties, contribution & licenses & permits,
consolidated funds, refund of
premium & quit rent, sales
salary on resignation, and
government & international of assets, rentals, service
refunds of training expenses
agencies. fees & entertainment duties
 State Revenues
According to Part III, Tenth Schedule of the
Federal Constitution, sources of revenue
assigned to state comprise of the following :
§ Revenue from toddy shops, lands, mines and forests.
§ Entertainment duty
§ Fees in courts other than federal courts
§ Fees and receipts in respect of specific services rendered
by departments of the state government
§ Receipts in respect of water supplies, including water rates
§ Rents on state property & interest on state balances
§ Zakat, fitrah & baitulmal & similar Islamic religious revenue
§ Treasure trove
According to Part V of the Schedule
provides the sources of revenue to the
state of Sabah & Sarawak as following :
§ Import duty & excise duty on petroleum products
§ Export duty on timber & other forest produce
§ State sales taxes
§ Fees & dues from ports & harbours other than
federal ports and harbours
§ Receipts in respect of water supplies & services,
including water rates
§ Revenue connected with water supplies and
services
 Local Revenues
§ All taxes, rates, rent, licenses fees, dues & other sums / charges
payable to the local authority
§ All charges / profits arising from any trade, service / undertaking
carried on by the local authority
§ All interest on any monies invested by the local authority & all
income arising from / out of the property of the local authority
§ All other revenue accruing to the local authority from the federal
/ state government, statutory body, other local authority / other
sources

Operating Expenditure
Charged Expenditure (Article 98)
Examples are as follows :
§ Any grant, remuneration / other moneys so charged
by any other article / federal law
§ All pensions, compensation for loss of office &
gratuities for which the federation is liable
§ Any moneys required to satisfy any judgement,
decision / award against the federation by any court
/ tribunal
§ Royal allocation/ allowances
• Represents all charges to the
budgeted allocation
• Is an expenditure that has been
approved by the parliament.
Supply Expenditure (Article 100)
Is the expenditure to be met from the
consolidated fund but not charged thereon
& shall be included in a bill known as a
supply bill.
Examples are as follows :
§ Payment for emolument, supplies &
services
§ Acquisition of assets, grants & fixed
charges & others
Development Expenditure
Ø In order to finance the development expenditure, the
government usually borrows on long-term basis from
internal / external financial institutions.
Ø Is allocated to domestic social services such as education &
health, economic services such as transport & public
utilities, and also internet security & defence.
 Role oF Central Agencies
in the Budgeting Framework
Budget Public
Economic
Management Service
Planning
Division Department
Unit (EPU)
(BMD) (PSD)
 Budget Management
Division (BMD)
Objective
Ø Allocate financial resources for the
implementation of plans or programmes
Ø Ensure that the allocation is utilised in
the most effective and efficient manner
Ø Examine and analyse agencies plans and
programmes conform to the national
budget policies
§ Treasury that in charge in preparing the
FEDERAL budget
§ Budget is prepared by the Budget Review
Officers (BROs)
Functions
Ø To allocate the federal resources that in line
with the national objective and policy
Ø To monitor all ministries / departments/
agencies spend the allocation effectively and
efficiency according the approved amount
Ø To manage the grants allocated to the states
and local authorities base on the Constitution
and decisions of the Cabinet and National
Finance Council

Public Service
Department (PSD)
Planning
§ Determine the roles of public sector
§ Determine the organisational size and
structure of the public agencies
§ Determine the requirements and
development of human resource
§ Determine pensions and retirement benefits
§ Determine the implications of privatisation/
separation on the public sector of human
resource
§ Develop strategic alliances and networking
§ Main concerned of operating budget which is basically to
review all the budget proposals for increases in numbers
and grades of stuff
§ Objective is to have high performance public service
personal agency in developing excellent workforce that
provides quality services through policy formulation and
human resource formulation
Development Management
§ Manage the appointment ,
§ Determine organisational
emplacement , remuneration ,
development policies
promotion, retirement benefits,
§ Develop career development
service conditions, employer-
policy employee relations, trainings, and
§ Develop career path human resource database
§ Develop succession planning § Formulate and clarify policies
§ Determine training policy § Manage policies monitoring
§ Manage policies evaluation
Economic Planning Main responsibility is responsible in preparation
Unit (EPU) of development plans for nations.

§ Enhance the Malaysia’s socioeconomic development

into a development of nation status year 2020
§ Improve the quality of life, and promote balanced
OBJECTIVES and sustainable development
§ Strengthen internal resilience and international
competitiveness
§ Promote optimum utilisation of available resources
§ Formulate policies and strategies for socioeconomic development
§ Prepare medium and long-term plans
§ Prepare development programmes and project budget
§ Monitor and evaluate the achievement of development of projects
§ Advice government on economic issues
§ Initiate and co-ordinate the privatisation programme and evaluate its achievement
§ Development of Malaysia’s involvement in growth triangle initiatives
§ Initiate and co-ordinate bilateral and multilateral assistance
§ Manage the Malaysian Technical Cooperation Programme
§ Monitor and evaluate investment activities
 January September- October September- December
Call circular for new Budget documents printed Parliament debates and
year estimates and submitted parliament approves new year budget

Agencies prepare and

submit new year
estimates

August- September
March End of December
Approval of new year
Received submissions and MOF issues warrant for
estimates by MOF and
BRO makes individual study expenditure
Cabinet

Budget
Preparation
Process April
Preliminary hearing
May- July
Budget hearing
Budget execution by
agencies