## 1. Priority Recommendations

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**Canonical URL:** [1. Priority Recommendations](https://www.imf.org/-/media/files/publications/cr/2019/1mysea2019003.pdf)

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### Summary of mission outcomes and priority recommendations
- TA missions by Mr. Hendrik Tillmann-Zorn during March 12–16, 2018, followed by remote capacity development through December 17–22, 2018, aimed to support authorities in improving government finance statistics (GFS) for decision making.
- Missions met with officials from the Ministry of Finance (MOF), Bank Negara Malaysia (BNM), Department of Statistics Malaysia (DOSM), and Accountant General’s (AG) Department.
- Mission focus: assist integration of accrual based financial information into GFS compilation and expand institutional coverage towards the general government and the nonfinancial public sector.
- Key findings:
  - Structural preconditions for using accrual and cash data from primary sources for the federal government are met; actual data is needed to confirm integrity of the compilation process.
  - Latest COA assessed as feasible for GFS reporting; general ledger structure sufficient to produce GFS on both a cash and an accrual basis, but no (preliminary) financial data was available at time of mission.
  - Considerable potential for collaboration between MOF and DOSM; current practice of reporting similar information from different sources leads to inefficiency and risk of inconsistencies.
  - MOF surveys for extrabudgetary units, state governments, local governments and nonfinancial public corporations need changes to accommodate GFS and NA requirements.
  - Differences in public sector investment data likely arose from different transactional classifications (distinction of current and capital spending); collaboration between MOF and DOSM recommended to ensure consistency.

- Priority actions and target dates:
  - Target Date: April 2019
    - Finalize the bridging table for the accrual-based COA and perform consistency checks/reconciliation exercises.
    - Responsible Institutions: MOF with support of AG
  - Target Date: April 2019
    - Update the surveys for extrabudgetary central, state, and local governments and nonfinancial public corporations to accommodate GFS requirements.
    - Responsible Institutions: MOF in alignment with DOSM
  - Target Date: April 2019
    - Develop strategy to align investment data between the MOF and the DOSM going forward.
    - Responsible Institutions: MOF and DOSM

### Integration of Accrual-Based Accounting Data
- Context and expected improvement:
  - Source data quality for federal fiscal statistics expected to improve significantly once financial reporting shifts to an accrual basis.
  - Current practice: GFS on a cash basis from secondary sources (mainly Economic Report and Financial Statistics from BNM); coverage of stocks limited to subset of major liabilities.
  - Availability of accrual accounting information will improve breadth and depth of fiscal information and analytical value.

- Key technical task: bridging table
  - Develop a comprehensive bridge table from the general ledger to corresponding GFS classifications to:
    - Prepare budgetary central government GFS directly from primary accounting data (trial balances of general ledger).
    - Increase automation.
    - Integrate stock data on assets and liabilities and possibly other economic flows into GFS reporting.

- Assessment of COA and data availability
  - Latest COA: structure and detail suitable for GFS compilation; new accounts introduced for depreciation and appreciation.
  - Remaining classification issues from previous missions persist and need review, extension, and addressing; completing task requires actual financial data (trial balances).
  - (Preliminary) financial data were not provided to the mission to solve remaining classification issues or to test integrity of bridging table.

- Recommended next steps (to be performed with actual trial balances and data tests)
  - a. Verify the substance of the underlying transactions for relevant accounts and confirm or determine the appropriate GFS treatment.
  - b. Compile the statement of sources and uses of cash and compile the balancing aggregates and statistical discrepancy to check data completeness and consistency.
  - c. Compile the statement of operations and compute the statistical discrepancy (difference between net lending/net borrowing and financing) to check data completeness and consistency.
  - d. Compile opening balance sheet stocks and assess the initial valuation of nonfinancial assets in major categories.
  - e. Compare cash with accrual revenue data in major revenue categories to verify the nature of differences arising from the time of recording.
  - f. Compare cash with accrual spending data in major expense categories to understand the nature of differences arising from the time of recording.

- Additional recommendations and timing
  - Authorities should work with actual trial balances from the accounting system and perform the tests above as soon as possible; reconciliation work may reveal further areas requiring attention to ensure completeness and integrity.
  - Consider redesigning parts of domestic macro-fiscal presentations to leverage richer accrual information; MOF could adapt presentation of fiscal statistics and analyses in national statistical reports where appropriate.
  - Target Date: April 2019 — Finalize the bridging table for the accrual-based COA and perform consistency checks/reconciliation exercises. Responsible: MOF with support of AG
  - Target Date: March 2020 — Adapt the presentation of fiscal information in the economic report to a more complete one based on an integrated balance sheet. Responsible: MOF

### Expansion of Institutional Coverage
- Objective:
  - Expand coverage of GFS reporting from budgetary central government to other subsectors of the public sector (general government and nonfinancial public sector), moving toward comprehensive international-standard fiscal reporting.

- Current practices and issues
  - MOF gathers and reports some high-level aggregates for general government and NFPS, but surveys are not integrated into GFS framework and data concepts do not follow international standards.
  - DOSM runs parallel surveys with different analytical emphasis, partially to the same units; DOSM uses combination of sources to cover extrabudgetary units, subnational governments, and nonfinancial corporations focusing on national accounts needs (value added, intermediate inputs, government final consumption, fixed capital formation).
  - MOF and DOSM currently report similar information using different sources or compilation procedures, creating inefficiency and risk of inconsistencies.

- Assessment by subsector and recommended next steps
  - Budgetary Central Government (Federal Government)
    - High-level: MOF and DOSM use same data source (General Ledger); bridging frameworks not mutually aligned, likely causing inconsistencies.
    - Next step: Compare and align bridging to ensure consistent treatment of fiscal transactions (e.g. investment, COFOG, Net Lending/Net Borrowing).
  - Extrabudgetary Central Government (Statutory Bodies)
    - High-level: Coverage slightly different; MOF uses Survey, DOSM uses Annual Reports.
    - Next step: Compare coverage; assess sharing MOF survey results with DOSM.
  - State Governments
    - High-level: Coverage same; MOF uses Survey, DOSM uses Annual Reports and Budget Documentation.
    - Next step: Quality check different data sources; assess sharing MOF survey results with DOSM.
  - Local Governments
    - High-level: Coverage slightly different (DOSM broader); different sample response rates.
    - Next step: Quality check sample response rates; assess sharing MOF survey results with DOSM.
  - Nonfinancial Public Corporations
    - High-level: Coverage different (MOF limited to 28 (as of 2018, based on legal selection criteria) group level entities; DOSM covers >1,900 entities); data sources differ.
    - Next step: Align concepts and sources to ensure consistent data for important aggregates (e.g. public investment).

- Survey structure assessment and recommended changes (high-level)
  - MOF surveys are a good starting point but require modifications to avoid incomplete coverage of flows and stocks and to reduce respondent confusion.
  - Recommended survey design changes:
    - a. Break down Current Revenue and Expense transactions into at least the main GFS economic classifications; allow simplified breakdown for nonfinancial public corporations.
    - b. Split between current and capital spending based on international statistical standards and allow breakdown into main asset categories (e.g. GFS four-digit codes of nonfinancial assets).
    - c. Collect information on financial transactions to ensure capture of all relevant transactions (and possibly other economic flows); define linkages clearly.
    - d. Collect stock values of nonfinancial assets, financial assets, and liabilities to allow classification according to macro-economic statistical standards.
    - e. Reconsider level of detail required for projected data; limit projections to key elements while keeping details for historical and current (budgeted) data to reduce reporting burden.

- Other observations
  - MOF data needs broader period coverage (two past years, plus current year revised, and one year budgeted/projected) and transactional detail; MOF data generally satisfies DOSM needs though timing issues may arise and can potentially be mitigated by using prior-year survey data comprising revised budgets.

### Assessment of survey structure and recommended changes (subsector details)
- Extrabudgetary Central government (Statutory Bodies)
  - Revenue: Tax Revenue includes CESS + Lump-sum other tax revenue; Non-Tax Revenue grouping only partially GFS compliant; Asset sales receipts only partially GFS compliant; Grants largely GFS compliant.
  - Expenditure: Current Expenses largely compatible with GFS classification; Capital Expenditure with some but not sufficient GFS breakdown.
  - Financial transactions and stocks: Current reporting includes Staff Loans (Assets), Equity investment (Assets); domestic and foreign liabilities not systematically structured by instrument and counterparty; Stocks limited and non-systematic.
  - Recommended changes: Make Non-CESS taxes GFS compliant, add social contributions by type of payer, use GFS categories for property income, change grant classifications to GFS, refine asset sales detail; adopt simplified or comprehensive GFS structures for financial transactions and stocks including residency and counterparty.

- State Governments
  - Revenue: Tax breakdown sufficient; Non-Tax Revenue largely GFS compliant but grants split by legislation.
  - Expenditure: Current expenditure simplified but sufficient; part of current covered under development expenditure; Capital (development) expenditure recorded by economic sector rather than asset type.
  - Financial transactions: Lending; Repayment; Financing.
  - Stocks: No information on stocks.
  - Recommended changes: Break down property income by GFS categories; confirm current/capital classification for grants; breakdown capital expenditure by GFS asset classification; record stocks of liabilities and possibly financial assets per simplified GFS classification.

- Local Governments
  - Revenue: Simplified tax breakdown; Non-Tax Revenue largely GFS compliant.
  - Expenditure: Current expenditure breakdown largely GFS compliant.
  - Financial transactions: Simplified breakdown of loan financing and deposit related flows.
  - Stocks: No stock information captured.
  - Recommended changes: Add detail for nonfinancial asset sales; add detail for current transfers (by receiving sector); add detail for capital transfers (by receiving sector); modify nonfinancial asset categories per GFS breakdown; record stocks of liabilities and possibly financial assets per simplified GFS classification.

- Nonfinancial Public Corporations
  - Revenue: Operating revenue captured in total; Non-operating revenue separate flows from (federal) government.
  - Expenditure: Lump-sum operative expenses (excl. depreciation); simple breakdown of non-operating expenses; Capital expenditure at group level by total fixed assets (disposals separate).
  - Financial transactions: Breakdown of group level borrowing by simplified instrument / counterparty.
  - Stocks: Total debt outstanding by counterparty, and partially instrument.
  - Recommended changes: Use total operative revenue for simplification (exception: break down property income by GFS category (4-digit)); lump-sum classification of current expenditure (exception: break down interest, dividend payments, income tax); breakdown nonfinancial investment by GFS asset classification (split domestic/foreign; group-level/assoc. companies); capture nonfinancial asset disposals, financial investments/disposals, liability transactions, and financial assets and liabilities by GFS classification (instrument, counterparty, residency); capture FX-revaluation gains by asset type.

### Expansion of stock information and other economic flows
- Current surveys do not fully leverage source data potential for comprehensive balance sheet information.
- Analysis suggests richer data should be available for all subsectors except state governments; statutory bodies, local governments, and nonfinancial public corporations use accrual accounting and should have balance sheet information on nonfinancial assets and financial assets and liabilities.
- Recommendation: Consider expanding scope of collected stock information, especially since federal government accrual balance sheet information will shortly be available and state governments plan to move towards accrual accounting.
- Recommendation: Consider capturing major components of other economic flows (e.g., revaluations due to price changes or obsolescence), noting that relevant events differ by subsector and require detailed assessment.

### Survey revision, communication, and training
- Recommended actions to facilitate transition:
  - One or more information event(s) for (major) statutory bodies, state governments, and possibly some major state-owned enterprises (SOE) to achieve understanding and buy-in.
  - Pragmatic approach for local governments (e.g., well-written survey documentation and guide or a webinar/web-based presentation).
  - Collect feedback on the revision of the surveys.

### Historical time series and accrual transition
- It may be possible to compile historical time series for general government and nonfinancial public sector level with some simplifications and restrictions.
- Existing data structure is in many analytically relevant areas compliant to a GFS presentation and could—with some assumptions or limitations—be used to create historical time series for parts of GFS tables.
- Recommendation: Consider preparing such a compilation in the future.
- The transition of federal government accounting and financial reporting to accrual basis complements expansion of fiscal statistics within the GFS framework to general government and public sector; collecting integrated balance sheet fiscal data across fiscal sectors would yield a comprehensive macro-economic view.

### Implementation target dates and responsibilities (selected)
- April 2019:
  - Modify the surveys for extra budgetary central, state, and local governments, and nonfinancial public corporations. — Responsible: MOF in alignment with DOSM
  - Align data collection for general government subsectors and nonfinancial public corporations between MOF and DOSM, and develop workflow scheme for potential data sharing (incl. legal arrangements and memorandum of understanding if required). — Responsible: MOF and DOSM
  - Make a quantitative assessment of discrepancies for public investment data. — Responsible: MOF with support of DOSM
  - Develop a strategy to align investment data between the MOF and the DOSM going forward. — Responsible: MOF and DOSM
- June 2019:
  - Issue new survey and begin new data collection. — Responsible: MOF
- December 2019:
  - Compile (unconsolidated) GFS data for all general government subsectors. — Responsible: MOF
  - Compile (simplified) GFS historical time series for (unconsolidated) general government sub-sectors and possibly also nonfinancial public corporations. — Responsible: MOF

### Consistency between macroeconomic statistics — public investment discrepancies
- Example discrepancy (2016):
  - MOF reported “Development Expenditure” of the nonfinancial public sector of RM 142,798m
  - DOSM reported gross fixed capital formation (GFCF) of the public sector of RM 105,504m
- Selected figures (RM million):
  - 2016 Development Expenditure (MOF) — Total General Government: 49,931
  - 2016 Gross Fixed Capital Formation (DOSM) — Total General Government: 56,188
  - 2016 Nonfinancial Public Corporations — MOF: 94,867; DOSM GFCF: 95,309
  - 2017 Total NFPS (MOF): 151,497 (presented alongside GFCF: 105,504)
- Discussed plausible causes:
  - Conceptual differences: GFS nonfinancial investment is more comprehensive (includes non-produced and foreign assets) versus national accounts GFCF (increases in domestic capital stock).
  - Classification issues: MOF starts from budget current vs. development split; DOSM applies detailed assessment from general ledger — inconsistent classification likely causes material differences.
  - Coverage issues: MOF surveys nonfinancial public corporations at group level and includes 28 companies; DOSM surveys capital formation at entity level and includes all public corporations (>1,900).
  - Data collection issues: Differences in survey structure, timing, and response rates may explain some discrepancies.
- Recommended steps:
  - Quantitative assessment using a comparison matrix to assess materiality of possible causes (MOF with DOSM support).
  - Use same source data going forward where possible and align compilation and presentation of results; revised GFS surveys should accommodate national accounts needs regarding timing and level of detail.
  - Produce bridge tables to explain remaining conceptual differences (e.g., produced vs. non-produced assets, domestic vs. foreign assets).
  - MOF could consider using DOSM data for their Economic Report to cover all public investment activity in macro-fiscal analysis.

### Public Sector Debt Statistics — QPSD reporting feasibility and recommendations
- Assessment:
  - Published data of BNM is not directly sufficient to compile data for the QPSD template, but with additional information data can be reported rather straightforward for budgetary central government.
  - Mission developed a simple template to process data from BNM for QPSD reporting.
- For budgetary central government:
  - BNM Tables 3.1.4 and 3.1.6 can be used as data sources with identified assumptions or separate information as necessary.
  - Table 3.1.4 provides data on the outstanding amount of Treasury bills and the split between resident and nonresident counterparties.
  - Table 3.1.6 provides information on the amount of debt maturing within one year from the reference period and the currency of denomination.
- Selected assumptions and implications:
  - All Treasury-Bills are short-term by original maturity.
  - Treasury-Bills are the only instrument with original maturity of < 1 year.
  - Separate information is available on all loans maturing within one year or less (currently and in the near future: none).
  - Implications: Table 3.1.4 is sufficient to populate short-term by original maturity; Table 3.1.6 is sufficient to identify long-term debt maturing in one year or less (currently only debt securities).

- Consolidated central government:
  - Additional information on debt outstanding for statutory bodies is available, but consolidation information is required because some debt is held by statutory bodies and some by the federal government.
  - Term structure and maturity profile information would be needed to populate QPSD Table 1.1 for consolidated central government.
  - Recommendation: MOF collaborates with BNM to gather aggregated values required to populate QPSD Table 1.1.

### QPSD reporting recommendation and implementation targets
- The mission recommends for the authorities to report QPSD data on an ongoing basis.
- First submissions could be limited to the budgetary central government sector.
- It would be desirable to collect data required to add the outstanding debt for statutory bodies, and particularly to gather data needed for consolidation.
- Target Date / Recommendation / Responsible Institutions:
  - April 2019 — Initiate QPSD reporting for the budgetary central government sector. — MOF, with support of BNM
  - April 2019 — Expand coverage of QPSD reporting to the consolidated central government sector. — MOF, with support of BNM

### Coverage, data sources, frequency, and transactional coverage (summary from Appendix I)
- Budgetary Central Government (Federal Government)
  - MOF Data Sources: AG/General Ledger (monthly)
  - MOF Frequency/Timing: Monthly/Quarterly
  - MOF Transactional Coverage: Cash Transactions (Actual); Debt Instrument (Actual)
  - DOSM Data Sources: AG/General Ledger (monthly); BNM
  - DOSM Frequency: Monthly/Quarterly

- Extra budgetary Central government (Statutory Bodies)
  - MOF Coverage: 80 SB (Fed. Gov.)
  - MOF Data Sources: Annual Survey; Some Financial Reports
  - MOF Frequency/Timing: Annual for June (sent out in April)
  - MOF Transactional Coverage: Cash Transactions (GFS Economic, + COFOG) 2y Actual, current revised + 1y projection; Debt Instruments 2y Actual, current revised + 1y projection
  - DOSM Coverage: 83 (Fed. Gov.)
  - DOSM Data Sources: Audited Financial Reports (with some gaps)
  - DOSM Frequency/Timing: Annual for March
  - DOSM Transactional Coverage: Detailed Transactions, Actual (Y-1, Y-2); Gross Fixed Capital Formation Actual (Y-1, Y-2)

- State Governments
  - MOF Coverage: 13 State Governments
  - MOF Data Sources: Annual Survey; Some Financial Reports (unaudited and audited)
  - MOF Frequency/Timing: Annual for June (sent out in April)
  - MOF Transactional Coverage: Cash Transactions (GFS Economic, + COFOG) 2y Actual, current revised + 1y projection; Debt Instruments 2y Actual, current revised + 1y projection
  - DOSM Coverage: 13 State Governments
  - DOSM Data Sources: Audited Financial Reports (with some gaps); For Y-1 roughly 50% Budget Documentation
  - DOSM Frequency/Timing: Annual for March
  - DOSM Transactional Coverage: Detailed Transactions, Actual (Y-1, Y-2); Gross Fixed Capital Formation Actual (Y-1, Y-2)

- Local Governments
  - MOF Coverage: 150 Municipal Governments
  - MOF Data Sources: Sample annual Survey (covering roughly 80% of total Revenue); Selected Financial Reports (audited)
  - MOF Frequency/Timing: Annual for June (sent out in April)
  - MOF Transactional Coverage: Cash Transactions (GFS Economic, + COFOG) 2y Actual, current revised + 1y projection; Debt Instruments 2y Actual, current revised + 1y projection
  - DOSM Coverage: 152 Municipal Governments
  - DOSM Data Sources: Audited Accounts (with gaps); Budget Documentation
  - DOSM Frequency/Timing: Annual for March
  - DOSM Transactional Coverage: Detailed Transactions, Actual (Y-1, Y-2); Gross Fixed Capital Formation Actual (Y-1, Y-2)

- Nonfinancial Public Corporations
  - MOF Coverage: 28 Corporations at Group Level
  - MOF Data Sources: Annual Survey; Some Financial Reports
  - MOF Frequency/Timing: Annual for June (sent out in April)
  - MOF Transactional Coverage: Limited Set of Transactions 2y Actual, current revised + 1y projection; Debt Instruments 2y Actual, current revised + 1y projection
  - DOSM Coverage: >1.900 Corporations at Entity Level
  - DOSM Data Sources: Audited Accounts (with gaps); Budget Documentation
  - DOSM Frequency/Timing: Annual for March
  - DOSM Transactional Coverage: Gross Fixed Capital Formation Actual (Y-1, Y-2)

*Source: 1mysea2019003 - 1. Priority Recommendations (IMF mission report).*

### 1. Priority Recommendations _____________________________________________________________________ 5

### 1. Priority Recommendations

### Summary of mission outcomes and priority recommendations
- TA missions by Mr. Hendrik Tillmann-Zorn during March 12–16, 2018, followed by remote capacity development through December 17–22, 2018, aimed to support authorities in improving government finance statistics (GFS) for decision making.
- Missions met with officials from the Ministry of Finance (MOF), Bank Negara Malaysia (BNM), Department of Statistics Malaysia (DOSM), and Accountant General’s (AG) Department.
- Mission focus: assist integration of accrual based financial information into GFS compilation and expand institutional coverage towards the general government and the nonfinancial public sector.
- Key findings:
  - Structural preconditions for using accrual and cash data from primary sources for the federal government are met; actual data is needed to confirm integrity of the compilation process.
  - Latest COA assessed as feasible for GFS reporting; general ledger structure sufficient to produce GFS on both a cash and an accrual basis, but no (preliminary) financial data was available at time of mission.
  - Considerable potential for collaboration between MOF and DOSM; current practice of reporting similar information from different sources leads to inefficiency and risk of inconsistencies.
  - MOF surveys for extrabudgetary units, state governments, local governments and nonfinancial public corporations need changes to accommodate GFS and NA requirements.
  - Differences in public sector investment data likely arose from different transactional classifications (distinction of current and capital spending); collaboration between MOF and DOSM recommended to ensure consistency.

- Table 1. Priority Recommendations
  - Target Date: April 2019
    - Finalize the bridging table for the accrual-based COA and perform consistency checks/reconciliation exercises.
    - Responsible Institutions: MOF with support of AG
  - Target Date: April 2019
    - Update the surveys for extrabudgetary central, state, and local governments and nonfinancial public corporations to accommodate GFS requirements.
    - Responsible Institutions: MOF in alignment with DOSM
  - Target Date: April 2019
    - Develop strategy to align investment data between the MOF and the DOSM going forward.
    - Responsible Institutions: MOF and DOSM

---

### Integration of Accrual-Based Accounting Data
- Context and expected improvement:
  - Source data quality for federal fiscal statistics expected to improve significantly once financial reporting shifts to an accrual basis.
  - Current practice: GFS on a cash basis from secondary sources (mainly Economic Report and Financial Statistics from BNM); coverage of stocks limited to subset of major liabilities.
  - Availability of accrual accounting information will improve breadth and depth of fiscal information and analytical value.

- Key technical task: bridging table
  - Develop a comprehensive bridge table from the general ledger to corresponding GFS classifications to:
    - Prepare budgetary central government GFS directly from primary accounting data (trial balances of general ledger).
    - Increase automation.
    - Integrate stock data on assets and liabilities and possibly other economic flows into GFS reporting.

- Assessment of COA and data availability
  - Latest COA: structure and detail suitable for GFS compilation; new accounts introduced for depreciation and appreciation.
  - Remaining classification issues from previous missions persist and need review, extension, and addressing; completing task requires actual financial data (trial balances).
  - (Preliminary) financial data were not provided to the mission to solve remaining classification issues or to test integrity of bridging table.

- Recommended next steps (to be performed with actual trial balances and data tests)
  - a. Verify the substance of the underlying transactions for relevant accounts and confirm or determine the appropriate GFS treatment (see previous TA report for details).
  - b. Compile the statement of sources and uses of cash (cash inflows and outflows from operating activities, net cash flows related to investment, net cash flows from financing activities) and compile the balancing aggregates and statistical discrepancy to check if data is complete and consistent (the so called “balancing of the accounts”).
  - c. Compile the statement of operations (revenue, expense, net investment in nonfinancial assets, net acquisition of financial assets, net incurrence of liabilities) and compute the statistical discrepancy (i.e. the difference between net lending/net borrowing and financing) to check if data is complete and consistent.
  - d. Compile opening balance sheet stocks and assess the initial valuation of nonfinancial assets in major categories.
  - e. Compare cash with accrual revenue data in major revenue categories to verify the nature of differences arising from the time of recording.
  - f. Compare cash with accrual spending data in major expense categories to understand the nature of differences arising from the time of recording.

- Additional recommendations
  - Authorities should work with actual trial balances from the accounting system and perform the tests above as soon as possible; reconciliation work may reveal further areas requiring attention to ensure completeness and integrity.
  - Consider redesigning parts of domestic macro-fiscal presentations to leverage richer accrual information; MOF could adapt presentation of fiscal statistics and analyses in national statistical reports where appropriate.
  - Target dates and responsibilities:
    - Target Date: April 2019 — Finalize the bridging table for the accrual-based COA and perform consistency checks/reconciliation exercises. Responsible: MOF with support of AG
    - Target Date: March 2020 — Adapt the presentation of fiscal information in the economic report to a more complete one based on an integrated balance sheet. Responsible: MOF

---

### Expansion of Institutional Coverage
- Objective:
  - Expand coverage of GFS reporting from budgetary central government to other subsectors of the public sector (general government and nonfinancial public sector), moving toward comprehensive international-standard fiscal reporting.

- Current practices and issues
  - MOF gathers and reports some high-level aggregates for general government and NFPS, but surveys are not integrated into GFS framework and data concepts do not follow international standards.
  - DOSM runs parallel surveys with different analytical emphasis, partially to the same units; DOSM uses combination of sources to cover extrabudgetary units, subnational governments, and nonfinancial corporations focusing on national accounts needs (value added, intermediate inputs, government final consumption, fixed capital formation).
  - MOF and DOSM currently report similar information using different sources or compilation procedures, creating inefficiency and risk of inconsistencies.

- Assessment of alignment by subsector and recommended next steps (high-level summary)
  - Budgetary Central Government (Federal Government)
    - High-level assessment:
      - MOF and DOSM use same data source (General Ledger).
      - Both units partially report on similar data (e.g. investment, COFOG, ...).
      - Bridging frameworks are not mutually aligned, likely leading to inconsistencies.
    - Next steps:
      - Compare and align bridging to ensure consistent treatment of fiscal transactions (e.g. investment, COFOG, Net Lending/Net Borrowing etc.).
  - Extrabudgetary Central Government (Statutory Bodies)
    - High-level assessment:
      - Coverage slightly different.
      - Data sources differ (MOF: Survey, DOSM: Annual Reports).
      - MOF data detail and period coverage generally sufficient for DOSM, but not vice versa (MOF needs past, current, and project data, and more detail).
    - Next steps:
      - Compare coverage.
      - Assess possibility to share MOF survey results for DOSM (confirm level of detail and timing is sufficient).
  - State Governments
    - High-level assessment:
      - Coverage is the same.
      - Data sources differ (MOF: Survey, DOSM: Annual Reports and Budget Documentation).
      - MOF data detail and period coverage generally sufficient for DOSM, but not vice versa (MOF needs past, current and project data and more detail).
    - Next steps:
      - Quality check of different data sources.
      - Assess possibility to share MOF survey results for DOSM (confirm level of detail and timing is sufficient).
  - Local Governments
    - High-level assessment:
      - Coverage is only slightly different (DOSM having broader coverage); both units experience different sample response rates.
      - Data sources differ (MOF: Survey, DOSM: Annual Reports and Budget Documentation).
      - MOF data detail and period coverage generally sufficient for DOSM, but not vice versa (MOF needs past, current and project data and more detail).
    - Next steps:
      - Quality check of different data sources and sample response rates.
      - Assess possibility to share MOF survey results for DOSM (confirm level of detail and timing is sufficient).
  - Nonfinancial Public Corporations
    - High-level assessment:
      - Coverage is different (MOF limited to 28 (as of 2018, based on legal selection criteria) group level entities, DOSM covers >1,900 entities).
      - Different data sources (MOF: Survey, DOSM: Annual Reports and Budget Documentation).
      - MOF data detail and period coverage generally sufficient for DOSM, but not vice versa (MOF needs current year, and one year projected data, and more detail).
    - Next steps:
      - Align concepts and sources to ensure consistent data for important aggregates (e.g. public investment).

- Survey structure assessment and recommended changes
  - MOF surveys are a good starting point for annual general government and NFPS GFS compilation, but require modifications to avoid incomplete coverage of flows and stocks and to reduce respondent confusion.
  - Recommendations to improve survey responses and ensure all relevant data is reported:
    - a. Current Revenue and Expense transactions (operative flows) should be broken down into at least the main GFS economic classifications. They may be further subdivided into categories for national purposes (e.g. flows linked to specific legislative provisions or programs). A simplified breakdown may be sensible for nonfinancial public corporations.
    - b. The split between current and capital spending should be based on international statistical standards and allow for a breakdown into at least the main asset categories (e.g. GFS four-digit codes of nonfinancial assets). Survey structure may differ by sector-specific logic but should always allow identification of economic nature of flows (distinction between flows affecting net worth and those related to investment in nonfinancial assets).
    - c. Information on financial transactions should be collected to ensure all relevant transactions (and possibly other economic flows) are captured and can be used for GFS reporting. Survey structure can align with source data logic but must capture all GFS categories and define linkages clearly.
    - d. Information on stock values of nonfinancial assets, financial assets, and liabilities should be collected to allow classification according to macro-economic statistical standards.
    - e. Reconsider level of detail required for projected data; limiting projections to key elements while keeping details for historical and current (budgeted) data could reduce reporting burden and improve data quality.

- Other observations
  - MOF data needs are broader in period coverage (two past years, plus current year revised, and one year budgeted/projected) and transactional detail; MOF data generally satisfies DOSM needs though timing issues may arise and can potentially be mitigated by using prior-year survey data comprising revised budgets.

*Source: 1mysea2019003 - 1. Priority Recommendations (IMF mission report).*

### 21.      Table 3 shows a comprehensive high-level assessment of the current survey

### 1mysea2019003 - 21.      Table 3 shows a comprehensive high-level assessment of the current survey

### Assessment of survey structure and recommended changes (high-level)
- Extrabudgetary Central government (Statutory Bodies)
  - Current flows — Revenue/Receipts from Sales:
    - Tax Revenue: CESS + Lump-sum other tax revenue
    - Non-Tax Revenue grouping only partially GFS compliant
    - Asset sales receipts only partially GFS compliant
    - Grants largely GFS compliant
  - Current flows — Expenditure (Current + Capital):
    - Current Expenses largely compatible with GFS classification
    - Capital Expenditure with some but not sufficient GFS breakdown
    - COFOG
  - Recommended changes — Flows:
    - Non-CESS taxes need to be GFS compliant, classified entity-by-entity
    - Social contributions by type of payer to be added
    - Use GFS categories for property income
    - Change to GFS classification for current and capital grants
    - Refine detail for asset sales
  - Recommended changes — Expenditure (Current + Capital):
    - Small structural changes for (current) expenses
    - Change to GFS asset classification for nonfinancial investment
  - Financial transactions and stocks:
    - Current: Staff Loans (Assets), Equity investment (Assets), domestic and foreign liabilities not systematically structured by instrument and counterparty
    - Stocks: Only limited set of liabilities with non-systematic combination of instrument and counterpart information
    - Recommended: Use simplified GFS structure for acquisitions/disposals of financial assets and for incurrence/repayment of liabilities by instrument/counterparty (incl. residency); Use more comprehensive GFS breakdown for financial assets and liabilities (with counterpart information for loans)

- State Governments
  - Current flows — Revenue/Receipts from Sales:
    - Tax Revenue: Sufficient breakdown along state-level specific tax categories
    - Non-Tax Revenue: Broken down largely into GFS compliant categories, but large amounts of grant revenue split by supporting legislation
  - Current flows — Expenditure (Current + Capital):
    - Current expenditure with simplified but sufficient breakdown
    - Part of current expenditure covered under development expenditure
    - Capital (development) expenditure recorded by economic sector rather than asset type
  - Financial Transactions:
    - Lending; Repayment; Financing
  - Stocks: No information on stocks
  - Recommended changes:
    - Revenue: Tax breakdown sufficient; Non-Tax Revenue — breakdown property income along GFS categories; Confirm current/capital classification for grants related to specific legislation; Refine detail for asset sales
    - Expenditure: Include breakdown of current development expenditure by economic category; Breakdown capital expenditure by GFS asset classification
    - Financial transactions: Apply (simplified) GFS classification for financial assets and liabilities applicable to state governments
    - Stocks: Record stocks of liabilities (and possibly financial assets) per simplified GFS classification

- Local Governments
  - Current flows — Revenue/Receipts from Sales:
    - Tax Revenue: Simplified tax breakdown
    - Non-Tax Revenue: Largely GFS compliant
  - Expenditure (Current + Capital):
    - Current expenditure breakdown largely GFS compliant
  - Financial transactions:
    - Simplified breakdown of loan financing and deposit related flows
  - Stocks: No stock information captured
  - Recommended changes:
    - Add detail for nonfinancial asset sales
    - Add detail for current transfers (by receiving sector)
    - Add detail for capital transfers (by receiving sector)
    - Slightly modify nonfinancial asset categories per GFS breakdown for capital expenditure
    - Slightly modify classification per (simplified) GFS classification
    - Record stocks of liabilities (and possibly financial assets) per simplified GFS classification

- Nonfinancial Public Corporations
  - Current flows — Revenue/Receipts from Sales:
    - Operating revenue captured in total
    - Non-operating revenue separate flows from (federal) government
  - Expenditure (Current + Capital):
    - Lump-sum operative expenses (excl. depreciation)
    - Simple breakdown of non-operating expenses
    - Capital expenditure at group level by total fixed assets (disposals separate), total direct or indirect acquisitions
  - Financial transactions:
    - Breakdown of group level borrowing by simplified instrument / counterparty
  - Stocks:
    - Total debt outstanding by counterparty, and partially instrument
  - Recommended changes — Flows and Stocks:
    - Use total operative revenue for simplification (exception: break down property income by GFS category (4-digit))
    - Lump-sum classification of current expenditure (exception: breakdown of interest and dividend payments and income tax)
    - Breakdown nonfinancial investment by GFS asset classification (split by domestic and foreign; split by group-level and assoc. companies)
    - Capture nonfinancial asset disposals by GFS classification
    - Capture financial investment and disposal by GFS classification (incl. residency)
    - Capture liability transactions by GFS classification (incl. residency)
    - Capture financial assets and liabilities by GFS classification (instrument, counterparty, residency)
    - Capture FX-revaluation gains by asset type

### Expansion of stock information and other economic flows
- Current surveys do not fully leverage source data potential for comprehensive balance sheet information.
- Analysis suggests richer data should be available for all subsectors except state governments; statutory bodies, local governments, and nonfinancial public corporations use accrual accounting and should have balance sheet information on nonfinancial assets and financial assets and liabilities.
- Recommendation: Consider expanding scope of collected stock information, especially since federal government accrual balance sheet information will shortly be available and state governments plan to move towards accrual accounting.
- Recommendation: Consider capturing major components of other economic flows (e.g., revaluations due to price changes or obsolescence), noting that relevant events differ by subsector and require detailed assessment.

### Survey revision, communication, and training
- Recommended actions to facilitate transition:
  - One or more information event(s) for (major) statutory bodies, state governments, and possibly some major state-owned enterprises (SOE) to achieve understanding and buy-in.
  - Pragmatic approach for local governments (e.g., well-written survey documentation and guide or a webinar/web-based presentation).
  - Collect feedback on the revision of the surveys.

### Historical time series and accrual transition
- Review concluded it may be possible to compile historical time series for general government and nonfinancial public sector level with some simplifications and restrictions.
- Existing data structure is in many analytically relevant areas compliant to a GFS presentation and could—with some assumptions or limitations—be used to create historical time series for parts of GFS tables.
- Recommendation: Consider preparing such a compilation in the future.
- The transition of federal government accounting and financial reporting to accrual basis complements expansion of fiscal statistics within the GFS framework to general government and public sector; collecting integrated balance sheet fiscal data across fiscal sectors would yield a comprehensive macro-economic view.

### Implementation target dates and responsibilities (selected)
- April 2019:
  - Modify the surveys for extra budgetary central, state, and local governments, and nonfinancial public corporations. — Responsible: MOF in alignment with DOSM
  - Align data collection for general government subsectors and nonfinancial public corporations between MOF and DOSM, and develop workflow scheme for potential data sharing (incl. legal arrangements and memorandum of understanding if required). — Responsible: MOF and DOSM
  - Make a quantitative assessment of discrepancies for public investment data. — Responsible: MOF with support of DOSM
  - Develop a strategy to align investment data between the MOF and the DOSM going forward. — Responsible: MOF and DOSM
- June 2019:
  - Issue new survey and begin new data collection. — Responsible: MOF
- December 2019:
  - Compile (unconsolidated) GFS data for all general government subsectors. — Responsible: MOF
  - Compile (simplified) GFS historical time series for (unconsolidated) general government sub-sectors and possibly also nonfinancial public corporations. — Responsible: MOF

### Consistency between macroeconomic statistics — public investment discrepancies
- Example discrepancy (2016):
  - MOF reported “Development Expenditure” of the nonfinancial public sector of RM 142,798m
  - DOSM reported gross fixed capital formation (GFCF) of the public sector of RM 105,504m
- Table 4 (selected figures, RM million):
  - 2016 Development Expenditure (MOF) — Total General Government: 49,931
  - 2016 Gross Fixed Capital Formation (DOSM) — Total General Government: 56,188
  - 2016 Nonfinancial Public Corporations — MOF: 94,867; DOSM GFCF: 95,309
  - 2017 Total NFPS (MOF) : 151,497 (presented alongside GFCF: 105,504)
- Discussed plausible causes:
  - Conceptual differences: GFS nonfinancial investment is more comprehensive (includes non-fixed assets and foreign assets) versus national accounts GFCF (increases in domestic capital stock).
  - Classification issues: MOF starts from budget current vs. development split; DOSM applies detailed assessment from general ledger — inconsistent classification likely causes material differences.
  - Coverage issues: MOF surveys nonfinancial public corporations at group level and includes 28 companies; DOSM surveys capital formation at entity level and includes all public corporations.
  - Data collection issues: Differences in survey structure, timing, and response rates may explain some discrepancies.
- Recommended steps:
  - Quantitative assessment using a comparison matrix to assess materiality of possible causes (MOF with DOSM support).
  - Use same source data going forward where possible and align compilation and presentation of results; revised GFS surveys should accommodate national accounts needs regarding timing and level of detail.
  - Produce bridge tables to explain remaining conceptual differences (e.g., produced vs. non-produced assets, domestic vs. foreign assets).
  - MOF could consider using DOSM data for their Economic Report to cover all public investment activity in macro-fiscal analysis.

### Public Sector Debt Statistics — QPSD reporting feasibility
- Assessment:
  - Published data of BNM is not directly sufficient to compile data for the QPSD template, but with additional information data can be reported rather straightforward for budgetary central government.
  - Mission developed a simple template to process data from BNM for QPSD reporting.
- For budgetary central government:
  - BNM Tables 3.1.4 and 3.1.6 can be used as data sources with identified assumptions or separate information as necessary.
  - Table 3.1.4 provides data on the outstanding amount of Treasury bills and the split between resident and nonresident counterparties.
  - Table 3.1.6 provides information on the amount of debt maturing within one year from the reference period and the currency of denomination.
- Table 5 — Additional information and assumptions required for PSDS-reporting (budgetary central government, selected points):
  - Table 1.1.1: Gross Budgetary Central Government Debt Position
    - Short-term by original maturity:
      - All Treasury-Bills are short-term by original maturity
      - Treasury-Bills are the only instrument with original maturity of < 1 year (specifically all loans have a longer original maturity)
      - Implication: The data in table 3.1.4 is sufficient to populate the table
    - Long-term by original maturity:
      - Separate information is available on all loans maturing within one year or less (currently and in the near future: none)
      - Implication: The data in table 3.1.6 is sufficient to identify all long-term debt maturing in one year or less (currently only debt securities). All loans can be identified from table 3.1.4. All long-term debt securities maturing in > 1 year can be identified as a residual from information in both tables
- Consolidated central government:
  - Additional information on debt outstanding for statutory bodies is available, but consolidation information is required because some debt is held by statutory bodies and some by the federal government.
  - Term structure and maturity profile information would be needed to populate QPSD Table 1.1 for consolidated central government.
  - Recommendation: MOF collaborates with BNM to gather aggregated values required to populate QPSD Table 1.1.

*Source: 1mysea2019003 - 21.      Table 3 shows a comprehensive high-level assessment of the current survey (IMF).*

### 35.      The mission recommends for the authorities to report QPSD data on an ongoing

### 1mysea2019003 - 35.      The mission recommends for the authorities to report QPSD data on an ongoing

### Recommendation and implementation targets
- The mission recommends for the authorities to report QPSD data on an ongoing basis.
- First submissions could be limited to the budgetary central government sector.
- It would be desirable to collect data required to add the outstanding debt for statutory bodies, and particularly to gather data needed for consolidation.
- Target Date / Recommendation / Responsible Institutions:
  - April 2019 — Initiate QPSD reporting for the budgetary central government sector. — MOF, with support of BNM
  - April 2019 — Expand coverage of QPSD reporting to the consolidated central government sector. — MOF, with support of BNM

### Coverage, data sources, frequency, and transactional coverage (from Appendix I)
- Budgetary Central Government (Federal Government)
  - MOF Data Sources: AG/General Ledger (monthly)
  - MOF Frequency/Timing: Monthly/Quarterly
  - MOF Transactional Coverage: Cash Transactions (Actual); Debt Instrument (Actual)
  - DOSM Data Sources: AG/General Ledger (monthly); BNM
  - DOSM Frequency: Monthly/Quarterly

- Extra budgetary Central government (Statutory Bodies)
  - MOF Coverage: 80 SB (Fed. Gov.)
  - MOF Data Sources: Annual Survey; Some Financial Reports
  - MOF Frequency/Timing: Annual for June (sent out in April)
  - MOF Transactional Coverage: Cash Transactions (GFS Economic, + COFOG) 2y Actual, current revised + 1y projection; Debt Instruments 2y Actual, current revised + 1y projection
  - DOSM Coverage: 83 (Fed. Gov.)
  - DOSM Data Sources (frequency): Audited Financial Reports (with some gaps)
  - DOSM Frequency/Timing: Annual for March
  - DOSM Transactional Coverage: Detailed Transactions, Actual (Y-1, Y-2); Gross Fixed Capital Formation Actual (Y-1, Y-2); Other, Actual (Y-1, Y-2)

- State Governments
  - MOF Coverage: 13 State Governments
  - MOF Data Sources: Annual Survey; Some Financial Reports (unaudited and audited)
  - MOF Frequency/Timing: Annual for June (sent out in April)
  - MOF Transactional Coverage: Cash Transactions (GFS Economic, + COFOG) 2y Actual, current revised + 1y projection; Debt Instruments 2y Actual, current revised + 1y projection
  - DOSM Coverage: 13 State Governments
  - DOSM Data Sources (frequency): Audited Financial Reports (with some gaps); For Y-1 roughly 50% Budget Documentation
  - DOSM Frequency/Timing: Annual for March
  - DOSM Transactional Coverage: Detailed Transactions, Actual (Y-1, Y-2); Gross Fixed Capital Formation Actual (Y-1, Y-2); Other, Actual (Y-1, Y-2)

- Local Governments
  - MOF Coverage: 150 Municipal Governments
  - MOF Data Sources: Sample annual Survey (covering roughly 80% of total Revenue); Selected Financial Reports (audited)
  - MOF Frequency/Timing: Annual for June (sent out in April)
  - MOF Transactional Coverage: Cash Transactions (GFS Economic, + COFOG) 2y Actual, current revised + 1y projection; Debt Instruments 2y Actual, current revised + 1y projection
  - DOSM Coverage: 152 Municipal Governments
  - DOSM Data Sources (frequency): Audited Accounts (with gaps); Budget Documentation
  - DOSM Frequency/Timing: Annual for March
  - DOSM Transactional Coverage: Detailed Transactions, Actual (Y-1, Y-2); Gross Fixed Capital Formation Actual (Y-1, Y-2); Other, Actual (Y-1, Y-2)

- Nonfinancial Public Corporations
  - MOF Coverage: 28 Corporations at Group Level
  - MOF Data Sources: Annual Survey; Some Financial Reports
  - MOF Frequency/Timing: Annual for June (sent out in April)
  - MOF Transactional Coverage: Limited Set of Transactions 2y Actual, current revised + 1y projection; Debt Instruments 2y Actual, current revised + 1y projection
  - DOSM Coverage: >1.900 Corporations at Entity Level
  - DOSM Data Sources (frequency): Audited Accounts (with gaps); Budget Documentation
  - DOSM Frequency/Timing: Annual for March
  - DOSM Transactional Coverage: Gross Fixed Capital Formation Actual (Y-1, Y-2)

*Source: 1mysea2019003 - IMF mission text and Appendix I.

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_Source: https://www.imf.org/-/media/files/publications/cr/2019/1mysea2019003.pdf_