TOPIC 2

GOVERNMENT STRUCTURES
& LEGAL FRAMEWORK

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 EXPECTED OUTCOME
Identify Components of Public Sector
Discuss Public Sector Legal Framework:
Federal Constitution
Financial Procedures Act
Audit Act
Treasury Instruction
Treasury Circular

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 Components of public sector
MALAYSIAN
GOVERNMENT

LOCAL
FEDERAL STATE
GOVERNMENT

MINISTRIES MINISTRIES *
DEPARTMENTS DEPARTMENTS
PUBLIC ENTERPRISE PUBLIC ENTERPRISE

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 LEGAL PROVISIONS & PROCEDURES
Federal Constitutions
Financial Procedure Act 1957
Audit Act 1957
Treasury Instructions and Circulars

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 Federal Constitution of Malaysia

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CONTENTS OF FEDERAL CONSTITUTION
PART VI - RELATIONS BETWEEN THE
FEDERATION AND THE STATES PART XI - SPECIAL POWERS AGAINST
Chapter 1—Distribution of legislative powers SUBVERSION, ORGANIZED VIOLENCE, AND
Chapter 2—Distribution of executive powers ACTS AND CRIMESPREJUDICIAL TO THE
PUBLIC AND EMERGENCY POWERS
Chapter 3—Distribution of financial burdens
Chapter 4—Land
PART XII - GENERAL AND MISCELLANEOUS
Chapter 5—National development
Chapter 6—Federal surveys, advice to States and
PART XIIA - ADDITIONAL PROTECTIONS FOR
inspection of State activities STATES OF SABAH AND SARAWAK
Chapter 7—National Council for Local Government
Chapter 8—Application to States of Sabah and Sarawak PART XIII - TEMPORARY AND TRANSITIONAL
PROVISIONS
PART VII - FINANCIAL PROVISIONS
Chapter 1—General* PART XIV - SAVING FOR RULERS’ SOVEREIGNTY,
Chapter 2—Application to States of Sabah and Sarawak ETC.

PART VIII - ELECTIONS PART XV - PROCEEDINGS AGAINST THE YANG Dl-

PERTUAN AGONG AND THE RULERS

PART IX - THE JUDICIARY

PART X - PUBLIC SERVICES 6

APSB 313: PUBLIC SECTOR ACCOUNTING
 LEGAL PROVISIONS & PROCEDURES

Part VII of the

Malaysian
Constitution –
Financial Provision

7 APSB313, SEMESTER 2, 2015/2016

PART VII - FINANCIAL PROVISIONS (Art 96 – 112)

 No taxation unless authorised by law

 Consolidated Funds
 All revenues and moneys howsoever raised or received by the Federation
shall, subject to the provisions of this Constitution and of federal law, be
paid into and form one fund, to be known as the Federal Consolidated
Fund.

 All revenues and moneys howsoever raised or received by a State shall,

subject to Clause (3) and to any law, be paid into and form one fund, to be
known as the Consolidated Fund of that State.

 Expenditure charged on Federal Consolidated Fund

 There shall be charged on the Consolidated Fund, in addition to any grant,
remuneration or other moneys so charged by any other Article or federal
law:
(a) all pensions, compensation for loss of office and gratuities
for which the Federation is liable;
(b) all debt charges for which the Federation is liable; and
(c) any moneys required to satisfy any judgment, decision or award
8 against
the Federation by any court or tribunal.
PART VII - FINANCIAL PROVISIONS (Art 96 – 112)

 Annual financial statement

 a statement of the estimated receipts and expenditure of the Federation
 the assets and liabilities of the Federation 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 outstanding.

 Supply Bills
 The expenditure to be met from the Consolidated Fund but not charged
thereon, other than expenditure to be met by such sums as are mentioned
in Clause (3) of Article 99, shall be included in a Bill, to be known as a
supply Bill, providing for the issue from the Consolidated Fund of the sums
necessary to meet that expenditure and the appropriation of those sums
for the purposes specified therein.

 Supplementary and excess expenditure

 a supplementary estimates showing the sums required or spent shall be
laid before the House of Representatives and the purposes of any such
expenditure shall be included in a supply Bill.
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PART VII - FINANCIAL PROVISIONS (Art 96 – 112)

 Powers to authorize expenditure on account or for unspecified

Purposes
 Contingencies Fund
 urgent and unforeseen need for expenditure for which no other provision
exists

 Withdrawals from Consolidated Fund

 no moneys shall be withdrawn from the Consolidated Fund unless they are
:
(a) charged on the Consolidated Fund; or
(b) authorized to be issued by a Supply Act; or
(c) authorized to be issued under Article 102.

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 The Malaysian Constitution PART VII – FINANCIAL PROVISION

PART VII - FINANCIAL PROVISIONS (Art 96 – 112)

 Auditor General
 There shall be an Auditor General, who shall be appointed by the Yang di-
Pertuan Agong on the advice of the Prime Minister and after consultation
with the Conference of Rulers.

 Powers and duties of Auditor General

 The accounts of the Federation and of the States shall be audited and
reported on by the Auditor General.

 Reports of Auditor General

 The Auditor General shall submit his reports to the Yang di-Pertuan Agong,
who shall cause them to be laid before the House of Representatives.
 A copy of any such report relating to the accounts of a State, or to the
accounts of any public authority exercising powers conferred by State law,
shall be submitted to the Ruler or Yang di-Pertua Negeri of that State, who
shall cause it to be laid before the Legislative Assembly.

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 The Malaysian Constitution PART VII – FINANCIAL PROVISION

PART VII - FINANCIAL PROVISIONS (Art 96 – 112)

 National Finance Council

 There shall be a National Finance Council consisting of the Prime
Minister, such other Ministers as the Prime Minister may designate,
and one representative from each of the States, appointed by the
Ruler or Yang di-Pertua Negeri.

 Grants to States
 capitation grant
 State road grant

 Assignment of taxes and fees to the States

 each of the States shall receive all proceeds from the taxes, fees and
other sources of revenue specified in Part III of the Tenth Schedule so
far as collected, levied or raised within the State.

 Restriction on borrowing
 Restriction on alterations in establishments of States
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 LEGAL PROVISIONS & PROCEDURES

Financial Procedure
LAWS OF MALAYSIA

REPRINT

Act 61
FINANCIAL PROCEDURE ACT 1957 Act 1957

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 Financial Procedure Act 1957
PART II
ACCOUNTING OFFICERS
• Duties of accounting officers
• Every accounting officer is subject to Financial Procedure Act 1957
• Every Accounting officer should perform duties such as, accounts & book keeping
• Subject to the instruction by the treasury

• Bank accounts
• No accounting officer shall open any public or official account in any bank without the
authority in writing of the Treasury in respect of public moneys of the Federation, or of
the State financial authority in respect of public moneys of a State,
• No accounting officer shall overdraw and no bank shall permit an overdraft on any
public or official account unless the same be authorized by the Treasury, in respect of
an account of public moneys of the Federation, or under the authority of a law made in
accordance with Article 111 of the Federal Constitution.

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 Financial Procedure Act 1957

PART III
CONTROL AND MANAGEMENT OF PUBLIC FINANCES
•

• Management and control of Consolidated Funds

• Consolidated Fund accounts
• Custody and investment of moneys
• Trust accounts
• Government trust funds
• Contingencies Fund
• State Reserve Fund
• Payment of moneys
• Guarantees
• Refunds, etc., charged on Consolidated Funds
• Estimates and virement
• Controlling officers
• Yearly statement of accounts
• Write-off
• Surcharge
• Notification of surcharge
• Withdrawal of surcharge
• Recovery of surcharge
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 Financial Procedure Act 1957

PART III
CONTROL AND MANAGEMENT OF PUBLIC FINANCES
•

• Management and control of Consolidated Funds

• Federal: minister
• State: State financial Authority

• Consolidated Fund accounts

• Consolidated Revenue Account
• Consolidated Loan Account
• Consolidated Trust Account

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 Financial Procedure Act 1957

PART III
CONTROL AND MANAGEMENT OF PUBLIC FINANCES
•

• Custody and investment of moneys

• all money must be kept in bank accounts
• at the Federal level, the money may be invested on the followings:
(i) on deposit in any bank;
(ii) in any of the investments authorized by the Trustee Act 1949 [Act
208], for the investment of trust funds;
(iii) in any joint fund maintained by the Crown Agents for such investment;
(iv) as otherwise authorized by federal law or by resolution of the Dewan
Rakyat

• at the State level, the money may be invested on the followings:

(i) on deposit in any bank;
(ii) in securities issued or to be issued by the Federal Government;
(iii) with the written authority of the Treasury, in any of the investments
authorized by the Trustee Act 1949, for the investment of trust funds, or in
any joint fund maintained by the Crown Agents for
such investment
(iv) subject to the authority of State law or a resolution of the Legislature in
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any undertaking after consultation with the Treasury,
 Financial Procedure Act 1957

PART III
CONTROL AND MANAGEMENT OF PUBLIC FINANCES
•

• Trust accounts
(a) all moneys appropriated for the purposes of any trust
account;
(b) all moneys received from the sale to any person or department of any
articles purchased or produced, or for work paid for, with moneys standing to
the credit of a trust account;
(c) all moneys paid by any person for the purpose of any trust account; and
(d) repayment of any loan or advance made from moneys standing to the
credit of the trust account and where applicable any interest as provided in
subsection 8(4).

• Government trust funds

• the source of money for Government trust funds must be paid from
Consolidated revenue account
*refer schedule 2 for example if trust funds at federal level and schedule
3 for trust funds at state level.

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 Financial Procedure Act 1957

PART III
CONTROL AND MANAGEMENT OF PUBLIC FINANCES
•

• Contingencies Fund
• in accordance with Article 103 of FC, federal government may
established a contingencies fund for the purpose of urgent and
unforeseen expenditure.
• the money shall be paid from the Federal Consolidated Fund

• State Reserve Fund

• the money shall be paid from Federal Consolidated Fund

• Payment of moneys
• the payments must be from the Revenue account by issuance of warrant
• authorised by law for payment from Loan account/ trust account
• issuance of warrant is for the service of any financial year and shall
lapse and cease to have any effect at the close of one calendar month
the following year (in accordance with modified cash basis concept)

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 Financial Procedure Act 1957

PART III
CONTROL AND MANAGEMENT OF PUBLIC FINANCES
•

• Guarantees
• No guarantee involving a financial liability shall be binding upon the
Federal Government, unless it is entered into with the written authority of
the Treasury or in accordance with federal law.

• No guarantee involving a financial liability shall be binding upon a State

unless it is entered into under a State law passed in accordance with
Clause (3) of Article 111 of the Federal Constitution and such guarantee
shall not be given except with the approval of the Federal Government
and subject to such conditions as may be specified by it.

• Refunds, etc., charged on Consolidated Funds

• the amount of refund, rebate or drawback must be credited into the
consolidated revenue account

• Estimates and virement

• the estimates must be laid before the legislature
• virement: transfer of allocation between head (see example)
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 EXAMPLE OF APPLICABILITY OF VIREMENT
Ministry of Higher Education
Amount Department A Department B

Allocated RM350,000 RM400,000

Spent RM400,000 RM350,000

Excess Virement RM 50,000

Based on the above example, it can been

• Department A will record the
seen that there is an excess amount of
transaction as virement in
RM50,000 in Department B. This amount
• department B will record the
can be transferred to Department A,
transaction as virement out
provided that they are within same ministry.

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 LEGAL PROVISIONS & PROCEDURES

Audit Act 1957

LAWS OF MALAYSIA

REPRINT

Act 62
AUDIT ACT 1957

22 APSB313, SEMESTER 2, 2015/2016

Audit Act 1957
•

Section
• 3: Terms and conditions of service of Auditor General

Section 4: Remuneration of Auditor General

Section 5: Duties of Auditor General

Section 6: Nature of Audit

Section 7: Powers of the Auditor General

Section 8: Secrecy

Section 9: Audit Reports

Section 10: Regulations

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Audit Act 1957
•

Section
• 3: Terms and conditions of service of Auditor General

The Auditor General (otherwise known as "Ketua Audit Negara") shall be

deemed to be an officer of the general public service of the Federation and, save
as is otherwise provided in the Federal Constitution and under this Act, the law
for the time being in force relating to the public service of the Federation and to
members thereof shall apply to him.

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Audit Act 1957
•

Section
• 4: Remuneration of Auditor General

• The remuneration of the Auditor General shall be as specified under the First
and Second Schedules.
• The expression "remuneration" in this Act shall have the meaning assigned to
that expression in Article 160 (2) of the Federal Constitution.
• All payments made under the First and Second Schedules shall be charged on
the Consolidated Fund.

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• Audit Act 1957
 Section 5: Duties of Auditor General

•The Auditor General shall in such manner as he may deem fit examine,
enquire into and audit-

 the accounts of accounting officers of the Federation and of the States;

 the accounts of any separate fund established in a State or the Federal Territory under Article
97 (3) of the Federal Constitution notwithstanding any law to the contrary;
 the accounts of any other public authority or body if it is so provided by law in any case; and,
where it is not so provided, at the request of that authority or body and with the consent of the
Minister of Finance to be notified in the Gazette;
 the accounts of any other body, including a company registered under the Companies Act 1965
[Act 125], in receipt of a grant or loan from the Federation or a State, and including also a
company where more than half it paid-up share capital is held by the Federation, a State or a
public authority or is so held in the aggregate by two or more of them:

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• Audit Act 1957

Section 6: Nature of Audit
 The Auditor General shall in his audit make such examination as he may deem necessary to
ascertain-
 whether all reasonable precautions have been taken to safeguard the collection and custody
of public moneys or other moneys subject to his audit;
 whether issues and payments of moneys subject to his audit were made in accordance with
proper authority and payments were properly chargeable and are supported by sufficient
vouchers or proof of payment;
 whether due care has been taken to account for and to ensure proper use, control,
maintenance and disposal of all public stores or other stores subject to his audit;
 whether all accounts and other records have been and are properly and faithfully
maintained;
 whether in his opinion moneys have been applied to the purposes for which they were
appropriated or authorized and the activities related to such purposes were carried out or
managed in an efficient manner with due regard for economy and the avoidance of waste or
extravagance; and
 whether the provisions of the Federal Constitution and of the Financial Procedure Act 1957,
and any other written law relating to moneys or stores subject to his audit have been in all
respects complied with.

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• Audit Act 1957
 Section 7: Powers of the Auditor General
 In the performance of his functions under the Federal Constitution or this Act
the Auditor General.
 may call upon any person for any explanations and information which the
Auditor General may require in order to enable him to discharge his duties;
 may, without payment of any fee, cause search to be made in and extracts to
be taken from any book, document or record in any public office;
 shall have access to all records, books, vouchers, documents, cash, stamps,
securities, stores or other property subject to his audit;
 may examine upon oath or affirmation (which oath or affirmation the
Auditor General is hereby empowered to administer) any person whom he
may think fit to examine respecting all matters and things whatever
necessary for the due performance of his functions;
 may authorize any public officer on his behalf to conduct any inquiry,
examination or audit and to report thereon to him; and
 may obtain the advice of a law officer upon any question of law.

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• Audit Act 1957
 Section 8: Secrecy

 The operation of section 7 shall not be limited by any provision (including a provision
relating to secrecy) contained in any other law except to the extent to which any such
other law expressly excludes the operation of that section.
 Notwithstanding anything contained in any other law and notwithstanding the making
of an oath or declaration of secrecy a person shall not be guilty of an offence by reason
of anything done by him for the purposes of section 7.
 Neither the Auditor General nor any other person shall divulge or communicate, except
in the course of duty to another person performing duties under this Act, any
information which has come to his knowledge directly or indirectly in accordance with
section 7 in any case in which the person from whom the information has been obtained
or from whose custody accounts, books, documents or papers from which the
information was derived were produced could not, but for this Act, lawfully have
divulged that information to the Auditor General or that other person.
 Subsection (3) shall not prevent the making, divulging or communicating in any report
of the Auditor General of conclusions, observations or recommendations which are
based on information obtained in accordance with section 7.

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• Audit Act 1957
Section 9: Audit Reports
 The Minister or the Menteri Besar or Chief Minister of a State as the
case may be shall, as soon as a statement required under section 16 of
the Financial Procedure Act 1957, has been prepared, transmit the
statement to the Auditor General who shall forthwith cause the
statement to be examined and audited and prepare his report thereon.
 In the event of any such statement not being received within a period of
seven months after the close of the financial year to which it relates, the
Auditor General shall submit a report to that effect to the Yang di-
Pertuan Agong who shall cause it to be laid before the Dewan Rakyat
at its next meeting, and in the case of a report relating to a statement
due from the Menteri Besar or Chief Minister of a State, the Auditor
General shall, before submitting the report to the Yang di-Pertuan
Agong, submit a copy thereof to the Ruler or Yang di-Pertua Negeri of
that State who shall cause it to be laid before the Legislative Assembly
30 at its next meeting.
• Audit Act 1957
Section 9: Audit Reports
 A copy of every report relating to the accounts of the Federation
prepared in accordance with subsection (1) shall be transmitted by the
Auditor General to the Minister who, if the Dewan Rakyat be not then
sitting, shall cause the statement and report to be published.
 If at any time it appears to the Auditor General that any serious
irregularities have occurred in the accounting or custody of public
moneys or public stores under his audit, he shall immediately bring the
matter to the notice of the Secretary General to the Treasury and, in the
case of moneys or stores of a State or a public authority, to the notice
also of the State financial authority or the head of that public authority,
as the case may be.
 The Auditor General may in any report submitted in accordance with
Article 107 (1) of the Federal Constitution or otherwise make
recommendations and may generally comment upon all matters
31 relating to public accounts, public moneys and stores.
• Audit Act 1957
Section 9: Audit Reports
 The Auditor General shall submit a certificate and observations on the
accounts of any separate fund established in the Federal Territory or a
State under Article 97 (3) of the Federal Constitution to the Yang di-
Pertuan Agong in the case of Federal Territory or the Ruler or Yang di-
Pertua Negeri of the State or to such other authority as may be
provided by Federal or State law.
 Unless it is otherwise required by law or by direction of the Minister,
where the Auditor General audits the accounts of any other authority or
body he shall present his certificate and observations upon those
accounts to the head of that authority or body and a copy thereof to the
Minister or Menteri Besar or Chief Minister responsible for that
authority or body, and the Auditor General may, at any time before
presenting such certificate and observation, bring to the notice of the
head of the authority or body or the Minister or Menteri Besar or Chief
32 Minister responsible for that authority or body any matter which in his
opinion requires immediate attention.
• Audit Act 1957
Section 9: Audit Reports
 Notwithstanding the provisions of this section, the Auditor General
may at any time submit a report to the Yang di-Pertuan Agong upon
any matters arising out of the performance of any of his duties or the
exercise of any of his powers under this Act or under any written law,
and may submit a copy of any such report to the Ruler or Yang di-
Pertua Negeri of a State or to a Minister.

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THANK YOU

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