QUESTION 3: MANAGEMENT ACCOUNTING IN PUBLIC SECTOR

Read the article and answer the questions.

Budget 2020 likely to have changes

The government is expected to make substantial changes to Budget 2020 as global and local economic outlook deteriorates, battered by tumbling oil prices and the coronavirus pandemic.

Economists, however, believe that the budget is unlikely to be expansionary, taking the recent oil prices into consideration.

At this point, given the oil price slump and markedly lower revenue, Malaysias government does not have the luxury to raise its spending significantly enough to help offset the slowdown in private sector demand, OCBC Bank (M) Bhd economist Wellian Wiranto told The Malaysian Reserve (TMR).

We are not likely to see expansionary budget, making it even more important for the finance minister to use whatever space he has in a judicious way, he added.

Expansionary budget would mean higher government expenditure, thus Wiranto feels that Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz is likely to focus on helping manufacturers and exporters that have been hit by both supply chain disruption and demand slowdown.

There might be some tweaks to the RM20 billion stimulus package with perhaps more help for broader industries.

Instead of the focus on the tourism sector, which was hit by the first wave of the viral outbreak given the demand slowdown, we would see targeted measures for the manufacturing and exports industries this time around, Wiranto said.

In terms of credit profile, OCBC does not think deficit will be ballooned up to warrant any immediate ratings downgrade by the major rating agencies.

In terms of policy actions, the bank still sees the brunt of the adjustment coming from the central bank front, due to relatively more ammunition.

We see a high chance of another Overnight Policy Rate cut when Bank Negara Malaysia meets next in May, for instance, he added.

Job losses may be imminent due to the economic challenges, but the damage might be contained by policy measures.

Meanwhile, Maybank Investment Bank Bhd group chief economist Suhaimi Ilias said there is a risk of job losses in Malaysias hardest-hit sectors such as aviation, hotels, food and beverage and retail.

One thing for sure, there will be no new hires anytime soon, he said.

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Suhaimi added that there might be a need to recalibrate Budget 2020 that was, among others, based on average full-year crude oil assumption of US$62 (RM264) per barrel.

The Malaysian government had revised its national budget before, where Budget 2016 was revised via RM8 billion-RM9.5 billion spending cuts to keep budget deficit to GDP ratio target at 3.1%.

We can see the same method to be applied if the crude oil price assumption for this years budget of US$62 per barrel is revised downwards and oil-related revenues are lower than originally expected, without compensating or offsetting increases in other sources of tax and non-tax revenues, Suhaimi said.

At this juncture, ensuring implementation of the measures in the stimulus package is of great importance and urgency, he told TMR.

The formation of the new Cabinet will help reduce implementation risk. According to him, the package can be adjusted and enhanced to provide further reliefs for businesses.

Suhaimi said the government may want to consider lengthening the period for financial and fiscal reliefs and stimulus, as currently most measures are for the period of March or April until August or September this year.

(themalaysianreserve.com., Friday, March 13th, 2020 by Nur Hanani Azman)

Required:

a) Explain TWO (2) importance of management accounting in public sector organization.

(4m)

b) Define budget and briefly explain the component of national budget.

(5m) c) In your opinion, the Article discussed which function of budget? Explain. (4m)

d) Based on the article, the year 2020 Budget need to be revised due to global and local economic outlook deteriorates, battered by tumbling oil prices and the coronavirus pandemic

Required:

State whether you agree or not with the above statement. Support with at least THREE (3) reasons. (4m)

e) Discuss the public sectors direction of budget if the 2020 Budget need to be revised.

(4m)

f) Discuss how public sector budgets reflect public sector accountability

**END OF QUESTIONS & BEST OF LUCK**

(4m)

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