Financial Administration in Local Government

FINANCIAL ADMINISTRATION
IN LOCAL GOVERNMENT
INTRODUCTION
 Local government is a body that manages public affairs
under its area of jurisdiction .
 It has its own financial autonomy with some restrictions.
 It collects revenues to maintain and provide good services

to people.
 It has to secure money to provide salary for its staff

SOURCES OF REVENUE
 Under Section 39 of Local Government Act, 1976,

Major sources of revenue for local government are:
a)taxes, rate assessment (cukai pintu), rent, licences fees,

dues and other charges.
Under Section 39(a) of Local Government Act 1976,

Local government can collect rates or assessment (cukai
pintu) on all premises annually.
 The assessment (cukai pintu) collected is for the service

of street lighting, scavenging and road maintenance.
SOURCES OF REVENUE
 Licence fees is for hawking, beauty salon, barber,
massage parlour, entertainment, food and drink stalls,
restaurant and coffee shops, fish and vegetables, dried
fruit and candies and etc.
b) Service charges or profits from any trade, service or

others as stated under Section 39(b)
 For example collection of garden refuge, dislodging of

sewerage tanks and collection of night-soil ( no longer
exist).
c) Interest on any money invested and all income from
property moveable or immoveable as provided under
Section 39(c).
 For example:
1) money from reserve fund is invested in the bank
and gain profit or
2) Grants from government is saved in the bank as

transit before doing any projects or,
3) Money saved in fixed deposit.

d) Grants, contribution or endowment from federal or
state government .
There are five types of grants as stated under

Section 39(d) :
1) Annual Equalization Grants

2) Launching Grants
3) Road Grants
4) Grant in lieu of rates
5) Other Grants
1)Annual Equalization grants
Given by government through state grants under

(Maintenance of Local Authorities) Act, 1981 except Sabah
and Sarawak.
2)Launching grant
For restructuring of local authorities for example for

upgrading facilities and buying equipments for servicing
local area.
3)Road Grant
For maintenance of roads certified by JKR. It is claimed
from state government but the money is from federal
government.
4) Grants in lieu of rates
 Contribution from federal and state government on

buildings owned by the two government.
5) Other grants
 Given by federal and state government for maintaning

local authorities, maintenance of drain, landscape etc.
e) For Sarawak, revenues from Majlis Kerajaan Negeri

also declared to be revenue of local authority as stated
Under Section 39(e) of Local authorities Ordinance.
Financial System And Procedures
Local government is subject to system and
Procedures as provided in the following statutes:
a) Financial Procedures Act, 1957

b) Audit Act, 1957
c) Treasury Instructions
d) Treasury circulars
e) Local Authorities Financial Regulations, 1997
The principle laws on financial systems
are on the areas of such as:
 Financial accounting duties

 Preparation of estimates and revenue
 Accounting principles and procedures
 Administration of payments, deposits,
loan and advances
 Management of assets,store and property
 Internal auditing
 etc
Q: Who checks and control financial?
A: The Auditor General or any appointed auditor.
The auditor will inspect the accounts.
Main purpose is to make sure the

account is kept in order.
The account is audited annually and
will be tabled in council’s meeting.
The report from auditor can be a
guide for local authority to do
internal inspection.
Financial Roles of Secretary, Treasurer
and Other Accounting Officer
Secretary
 is a Financial controller of local authority
 is a Chief Executive Officer (CEO)
 has to record all transactions, deeds,
documents and financial administration.
Monitor and supervise overall financial
administration.

Treasurer
There are several accounting officers under a Treasurer
Job as a Treasurer
1) Ensuring adequate supervision receipt of revenues

2) Ensuring safe keeping of money, account book,
revenue forms, cheque forms and others.
3) Prepare annual financial statement
4) To tell council if money is being over spend
5) Make sure bank balance statements are correct
6) To prevent any money loss from negligence, fraud,
irregulaties or theft from accounting officers.
Accounting officer
1) Works under a secretary
2) Entrusted with receipt, disbursement (make
payment) of moneys
3) Safe keeping of all cash received
4) Make sure the accuracy of account.
5) Must report promptly to Treasurer for any
deficiently in cash money.
6) Report to Treasurer for any wrong doing
done by his staff.
7) Must know laws, circulars, instructions,
council’s resolution and standing orders.
Characteristics of A
Good Financial system
1) Proper maintenance of books and records
2) Compliance with rules and regulations
3) Timely and correct preparation of report
4) Having good and reliable financial base
5) Efficient collection centres
6) Practicing good spending habit
Financial Problems of Local Authorities
1) Limited fund – As a result many development

projects cannot be done because most funds are
from federal and state grants.
2) Additional man power – Local authority has to
pay much money for its staff
3) Weakness of revenue collection – unable to
collect rates(cukai pintu) to the fullest and people
don’t want to pay the rates.
4) Limited revenue base – especially for rural local
authorities eg: Majlis Daerah Baling, etc
5) Bad spending habit – Mostly spend lavishly Eg,
spend on expensive office building and vacation.
Main Cause of financial problems of Local
Authorities
1) Poor financial management

2) Not looking into best practices
3) Lack of training
4) Poor planning in term of fund
How To Solve Financial problems
in Local Authorities
1) Increase the source of revenue base

2) Effective collection of rates
3) Effective planning and controlling of fund
4) Avoid excessive spending
5) Change of mindset for staff to be good in
spending habit
6) Provide effective training on financial
management
Conclusion
 It is a challenge to manage financial

administration in local authorities
 It is tough to meet taxpayers demand for better
services when there is not enough fund.

MAJLIS PERBANDARAN SUBANG JAYA
RINGKASAN ANGGARAN HASIL DAN PERBELANJAAN TAHUN 2009
TAHUN 2009 (RM)

HASIL
(i) Hasil Cukai 60000 154,000,000.00
(ii) Hasil Bukan Cukai 70000 38,298,710.00
(iii) Terimaan Bukan Hasil (80000)
a) Pulang Balik Perbelanjaan -
b) Geran Keseimbangan 2,000,000.00
- Persekutuan 10.00
- Negeri 10.00
c) Geran Penyelenggaraan Jalan 10.00
d) Caruman Membantu Kadar 500,000.00
e) Geran Pembangunan -
f) Lain-lain Terimaan -
JUMLAH HASIL 194,798,740.00
PERBELANJAAN
Emolumen (10000) 26,300,550.00
Perkhidmatan dan Bekalan (20000) 147,299,770.00
Perbelanjaan Penyelenggaraan Jalan (28203) 10.00
Aset (30000) 4,076,100.00
Pemberian dan Kenaan Bayaran Tetap (40000) 5,959,990.00
Perbelanjaan -perbelanjaan Lain (50000) 1,042,980.00
Perbelanjaan Mengurus 184,679,400.00
Perbelanjaan Pembangunan Dibiayai Majlis (39100-39400) 9,883,000.00
Perbelanjaan Pembangunan Kerajaan Negeri (39700) -
Pinjaman (39600) 10.00
JUMLAH PERBELANJAAN 194,562,410.00
LEBIHAN / (DEFISIT) 236,330.00
Bajet 2008 ini telah diluluskan dalam Majlis Mesyuarat Kerajaan Negeri pada 21 Januari 2009
MAJLIS PERBANDARAN SUBANG JAYA
RINGKASAN ANGGARAN HASIL DAN PERBELANJAAN TAHUN 2009
TAHUN 2009 (RM
HASIL
(i) Hasil Cukai 60000 154,000,000.00
(ii) Hasil Bukan Cukai 70000 38,298,710.00
(iii) Terimaan Bukan Hasil (80000)
a) Pulang Balik Perbelanjaan -
b) Geran Keseimbangan 2,000,000.00
- Persekutuan 10.00
- Negeri 10.00
c) Geran Penyelenggaraan Jalan 10.00
d) Caruman Membantu Kadar 500,000.00
e) Geran Pembangunan -
f) Lain-lain Terimaan -
JUMLAH HASIL 194,798,740.00
PERBELANJAAN
Emolumen (10000) 26,300,550.00
Perkhidmatan dan Bekalan (20000) 147,299,770.00
Perbelanjaan Penyelenggaraan Jalan (28203)10.00
Aset (30000) 4,076,100.00
Pemberian dan Kenaan Bayaran Tetap (40000) 5,959,990.00
Perbelanjaan -perbelanjaan Lain (50000) 1,042,980.00
Perbelanjaan Mengurus 184,679,400.00
Perbelanjaan Pembangunan Dibiayai Majlis (39100-39400) 9,883,000.00
Perbelanjaan Pembangunan Kerajaan Negeri (39700) -
Pinjaman (39600) 10.00
JUMLAH PERBELANJAAN 194,562,410.00
LEBIHAN / (DEFISIT) 236,330.00
Bajet 2008 ini telah diluluskan dalam Majlis Mesyuarat Kerajaan Negeri pada 21 Januari 2009

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FINANCIAL ADMINISTRATION

 It has its own financial autonomy with some restrictions.

 It collects revenues to maintain and provide good services

 It has to secure money to provide salary for its staff

 Under Section 39 of Local Government Act, 1976,

a)taxes, rate assessment (cukai pintu), rent, licences fees,

Under Section 39(a) of Local Government Act 1976,

 The assessment (cukai pintu) collected is for the service

b) Service charges or profits from any trade, service or

 For example collection of garden refuge, dislodging of

2) Grants from government is saved in the bank as

3) Money saved in fixed deposit.

There are five types of grants as stated under

1) Annual Equalization Grants

Given by government through state grants under

For restructuring of local authorities for example for

 Contribution from federal and state government on

 Given by federal and state government for maintaning

e) For Sarawak, revenues from Majlis Kerajaan Negeri

a) Financial Procedures Act, 1957

 Financial accounting duties

The auditor will inspect the accounts.

Main purpose is to make sure the

1) Ensuring adequate supervision receipt of revenues

1) Limited fund – As a result many development

1) Poor financial management

1) Increase the source of revenue base

 It is a challenge to manage financial

TAHUN 2009 (RM)

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