Malaysia On Track For Switch To Accrual-based Accounting In Public Financial Management

KUALA LUMPUR, May 19 (Bernama) -- Malaysia is seen to be on track to transforming its public financial management to accrual-based accounting to provide better expenditure and budgeting for the well-being of its citizens in the future.

"The government is committed to transforming the system from the current cash-based method, so that there will be better financial management in the public sector," said Chartered Institute of Public Finance and Accountancy (CIPFA) Chairman, Ian Ball.

He believed that Malaysia's financial management system would perform better if the reform is continued and fully implemented.

Apart from Malaysia, he said other developing countries such as China, India and Mongolia were currently moving towards accrual-based accounting in their public financial management system.

"The system is on par with that of other developed countries like the United States, the United Kingdom, France and Canada.

"Most governments are encouraged to adopt the accrual method for greater accountability and transparency," he told Bernama on the sidelines of the Public Sector Financial Management Conference 2016 here, today.

In 2010, the government introduced the Public Finance Reform Strategic Reform Initiative (SRI) under the National Economic Advisory Council (NEAC), an independent think-tank mooted by Prime Minister Datuk Seri Najib Tun Razak.

The SRI is aimed at strengthening the government's finances to ensure stability and sustainability of public funds.

To ensure the SRI's success, the NEAC has recommended four fiscal policy measures, one of which is to adopt accrual accounting for prudent fiscal management.

It is believed that the government will implement the accrual method in the near future.

The cash-based accounting is a method usually adopted by small businesses and some government entities, in which the transaction is recorded when money is received and expenses only occur when it is paid out.

For accrual-based accounting, transactions are counted when the orders or services are incurred, regardless of when the money is paid.

Meanwhile, CIPFA Chief Executive Officer Rob Whiteman said as many countries had moved to the accrual-based method, Malaysia can consider fiscal policy in the context of a full set of financial information, not just deficit or debt, but also look at the balance sheet and make it one of the fiscal indicators.

"So, the budget will effectively become a forecast, instead of just a financial statement of the government," he added.

Themed, "Driving Improvements in Service Delivery", the one-and-a-half day conference, from today, is jointly organised by MIA and CIPFA, a leading accountancy body for the public service and providing education, training in accountancy and financial management.

The event focuses on how the ongoing transformation of the Malaysian and global public financial management systems can further be enhanced to benefit the public and country as a whole.

-- BERNAMA