It is high time the government changed its financial reporting system which poses a huge impediment to transparency and accountability, a senior accountant.

Former Malaysian Institute of Accountants (MIA) president and serving council member Dr Abdul Samad Alias said the prevailing cash accounting method was far behind the private sector practice.

"We have moved on to fair-value accounting which provides for more transparency. If I can, I will certainly recommend that the government change to accrual accounting."

He cited instances to show how the government's financial reporting system still lacked transparency.

He was speaking at a half-day corporate sector dialogue on 'Integrity As a Way of Life: Individual, Corporate and Community' at the Malaysian Institute of Integrity (MII) in Kuala Lumpur yesterday.

(The accrual accounting method matches expenses incurred by a company with the revenue generated during a specified period as opposed to cash accounting which recognises transactions only when there is an exchange of cash.)

Citing the deplorable state of financial reporting by federal and state bodies, he said the government should immediately establish a statutory body similar to the private sector's Malaysian Accounting Standards Board (MASB).

Who is reporting?

Through a series of pop quiz-like questions, he asked participants if they knew how many government agencies had produced financial reports within three months after the balance date.

"Only one. Bank Negara Malaysia, and it has never failed to report on Mar 31 every year."

He asked if they knew how many state economic development corporations have been able to produce their accounts on time.

"Only two out of 14 in the country, and you may be surprised to learn that one of them is the Kelantan SEDC."

Participants were silent when he popped the question on the number of local authorities in the country.

"You see, this (financial reporting) is what transparency and accountability is all about but its absence has been accepted as the best practice.

"The private sector has an act of Parliament creating the MASB as the regulatory mechanism but why is there no mirror body for government agencies?" said Abdul Samad, noting that the federal and state governments did not even know the full list of all the assets they owned.

He was formerly the deputy country managing partner (financial accounting/management accounting) of Arthur Andersen & Co, the top of the Big 5 accounting firms, before joining another accounting heavyweight, Ernst & Young Malaysia, as non-executive chairperson.

Better monitoring

The system of appointing auditors, he said, should also be changed for better monitoring by the Securities Commission (SC) to realise the goal of greater integrity in the corporate sector.

"I've suggested to the SC to change the system of appointing auditors where shareholders of public-listed companies continue to appoint auditors but the fees be made payable to the commission for service-level monitoring."

Abdul Samad believed that "integrity is who you are when no one is watching".

During the three-hour briefing-cum-dialogue session, the 30-odd corporate figures and academicians insisted that integrity was dependent on personal values inculcated through family upbringing and early education.

Federal police commercial crime investigation department deputy director 1 DCP Sulaiman Mohd Yusof said when providing an update that:

"Criminals are not manufactured in factories nor are they being sold in supermarkets. They are born to our parents and it is our responsibility to ensure that our children do not fall into criminal groups."

Laying down the current trend, Sulaiman said enforcement agencies worldwide were now faced with more sophisticated modus operandi due to the evolution of transnational crime.

"We now face internet crimes, cyber-terrorism, money-laundering, criminal hacking and economic sabotage, to name a few.

"Recent intelligence (data) and (our) experience have revealed that these syndicates have even penetrated into government agencies, financial institutions and banks," he said, adding that companies should consistently monitor their own employees and managers.

"Companies should adopt internal monitoring mechanisms also enhances law enforcement."

Thriving red-tape

During the dialogue, a participant criticised the long-standing shortcomings in the public delivery system, which he said, presented the opportunity for corruption.

"The government should identify the areas it could out-source to ensure a more effective and efficient service."

MII president Dr Sulaiman Mahbob, who moderated the session, said efforts were underway to improve services but that it can only succeed with the cooperation of the various parties.

"In fact, Mampu (Malaysian Administrative Modernisation and Management Planning Unit) is also looking at how to improve the public delivery services."

There was also a suggestion from the floor to include Malay-Muslims during moral lessons in schools.

"Education is very important in shaping an individual's character. As such, moral lessons should not be only for non-Malays and should be taught early in the school system."

The MII has been holding similar sessions with various sectors as part of efforts to compile feedback for its recommendations to the government in implementing the National Integrity Plan.