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Chapter - 12
Brunei Darussalam

INTRODUCTION ON BUDGETING AND ACCOUNTING

1    LEGISLATURAL REQUIREMENTS FOR FINANCIAL MANAGEMENT AND CONTROL

Brunei Darussalam became a fully independent and sovereign nation on 1st January 1984 after almost one hundred years of British protection. His Majesty the Sultan and Yang Di-Pertuan, also as Prime Minister, is the supreme executive authority of Brunei Darussalam. His powers and duties are enshrined in the Brunei Darussalam Constitution. Matters relating to the management and control of finance are set out in the Constitution Financial Procedure Order, which enables the Minister of Finance, with the approval of His Majesty the Sultan and Yang Di-Pertuan, to issue relevant Financial Regulations. These Regulations, which are issued for the guidance of all public officers, mandate procedures for the collection, receipt, custody, expenditure, care and management of public moneys; and for the purchase and disposal of public property. In addition to the Financial Regulations, Treasury Instructions are also issued to amplify the financial and accounting procedures.

Under the Audit Act, the Auditor General is required to audit the Consolidated Fund of the Government and any public body if so provided by law or if not so provided, may do so with the consent of His Majesty the Sultan and Yang Di-Pertuan.

1.1    FINANCIAL PROCEDURE

His Majesty the Sultan and Yang Di-Pertuan as the supreme executive authority is charged with the management of all public funds of Brunei Darussalam. In the exercise of his duties, His Majesty the Sultan and Yang Di-Pertuan acts on the advice of the Council of Ministers and on matters of finance through the Minister of Finance. Each year the Minister of Finance will make known to His Majesty the Sultan and Yang Di-Pertuan the financial needs of the Government. The funds granted are obtained from the Consolidated Fund.

1.2    CONSOLIDATED FUND

The sources of revenue received by the Brunei Government are categorised:

CLASS I  

Duties, taxes and licences.

CLASS II  

Receipts for, or in aid of, specific Government services.

CLASS III  

Receipts on account of undertakings of a commercial character.

CLASS IV  Revenue from Government properties.

All revenues and moneys, irrespective of how raised or received by the government, are required by law to be paid into one fund known as the Consolidated Fund.

2    THE ROLE OF SULTAN IN COUNCIL IN FINANCIAL ACCOUNTABILITY AND MANAGEMENT

2.1    ANNUAL APPROPRIATIONS

The Budget Committee submits the annual estimates to the Sultan in Council for approval. The annual estimates show the total sums charged to the Consolidated Fund, total expenditure needed to meet the proposed activities by the Government and the total expected revenue to be collected during that particular financial year. Expenditure charged to the Consolidated Fund-such as payments for the civil list, pensions, gratuities and grants, debt charges, salaries of the Auditor General and members of the Public Service Commission-is obligatory under the law and therefore appropriation is not required annually. All other expenditure requirements of the Government are included in the Supply Bill. The Supply Bill is laid before the Sultan in Council for approval and, when it becomes law, is known as the Supply Act. Departments are not allowed to spend unless the Treasury issues the Treasury Warrant authorising them to do so.

In respect of any financial year, if the amount appropriated by the Supply Act is not sufficient or the need for additional expenditure has arisen or that any moneys have been expended for purposes in excess of the appropriated amount, a Supplementary Estimate showing the sums required will be laid before the Sultan in Council and such expenditure is then included in a Supplementary Supply Bill. The Supply Act, which is issued before the commencement of each year, shows the total sums allocated for each Ministry and Department by Vote Heads. The sums approved are shown in block totals only. The detailed estimates are by Heads and Sub Heads of expenditure, and control over them is by the Treasury and by the Departments or Ministries themselves.

2.2    CONTINGENCIES FUND

Under the Constitution the Sultan in Council may create a Contingencies Fund. All moneys appropriated to the Contingencies Fund are paid from the Consolidated Fund. The purpose of the Contingencies Fund is to provide funds where an urgent and unforeseen need for expenditure has arisen for which no other provision has been made in the Supply Act. Such sums advanced from the Contingencies Fund will subsequently be authorised by supplementary estimates and the Fund is then reimbursed.

3    THE ROLE OF THE EXECUTIVE IN FINANCIAL ACCOUNTABILITY AND MANAGEMENT

3.1    THE TREASURY MINISTRY OF FINANCE

The Minister of Finance is one of the Government members, who advises His Majesty the Sultan and Yang Di-Pertuan with regard to total Government expenditure and financial policy. The Treasury exercises control through the budget and by ensuring that departments comply with Financial Regulations and Treasury Instructions. Furthermore, no department may incur any expenditure without a Treasury Warrant. The Treasury Warrant, which is valid for the financial year, authorises departments to spend within the limits specified in the warrant. Any balance remaining after the lapse of the financial year cannot be carried forward to the next year. In case of the Development Fund, however, balances at the close of the financial year are available for further appropriation where there is a need to complete program or projects in the following year.

Any department may with the approval of the Minister of Finance under warrant, transfer savings under one subhead of expenditure to another under the same Vote Head provided that the total approved under the Head is not exceeded.

3.2    ROLE OF THE BRUNEI CURRENCY BOARD

There is no Central Bank in Brunei Darussalam. However, the Brunei Currency Board plays an important role in this respect. The Board controls the amount of money in circulation and assists the Government in implementing the nation's monetary policy. The Board is also responsible for co-ordinating the activities of banks and finance companies in order to provide sufficient notes and coins in circulation to fulfill commercial requirements. The Board's responsibilities extend beyond the issuance and management of Brunei Darussalam's currency-it also functions as the principal licensing and monitoring agency for the nation's banks and finance companies.

4    THE ROLE OF THE SUPREME AUDIT INSTITUTION SAl

The Auditor General is appointed by His Majesty the Sultan and Yang Di-Pertuan of Brunei Darussalam in accordance with section 66 of the Constitution of Brunei DarussaJam. The Constitution also guarantees his independence and security of tenure.

In the performance of his functions under the Constitution and the Audit Act, the Auditor General:

In his audit, the Auditor General is required to ascertain:

The Auditor General may also be called upon to perform other statutory audits in addition to his constitutional audits, such as those prescribed by the Currency Act, and the Religious Court and Kathis Court Act. Where other statutory audit functions of public bodies are not specifically provided for by any written law, the Sultan in Council may if he is satisfied that the public interest so requires, direct that the accounts of such authorities be audited by the Auditor General.

The Auditor General submits his report to His, Majesty the Sultan and Yang Di-Pertuan and to the accounting officers concerned. In his report the Auditor General may make recommendations for improvement and corrective action and also comment upon any matter relating to public moneys and public accounts.

4.1    AUDITING STANDARDS

Generally accepted auditing standards and guidelines set by accounting bodies which are applicable to public sector audit are generally followed by the SAI.

5    BUDGETING SYSTEM

The budgeting system in Brunei Darussalam comprises the annual budget and the five year National Development Plan Budget.

5.1    ANNUAL BUDGET

Since 1990 the Ministry of Finance has enforced an incremental budget on each Ministry/Department specifying the maximum increase allowed based on current year budget performance. The annual expenditure budget is divided into three major parts:

The annual revenue estimates are based on projections using current year figures, and any material changes or new sources of revenue are fully explained.

5.2    NATIONAL DEVELOPMENT PLAN BUDGET

National Development Planning is a continuous process, integrating both economic and social objectives of the long-term basic policy directions of the country.

The objectives of the Fifth National Development Plan 1986-90, for example, were as follows:

The National Development Plan is formulated by the National Development Committee whose members are appointed by His Majesty the Sultan and Yang Di-Pertuan. The Plans are then approved by the Sultan-ln-Council. The Economic Planning Unit, which serves as a secretariat for the National Development Committee, requests annual appropriations for development in accordance with the annual targets.

5.3    BUDGET CLASSIFICA TION

Brunei Darussalam's main source of revenue comes from oil, accounting for over 90 per cent of total Government revenues.

The two major components of the expenditure budget are operating supply and charged expenditure and development expenditure. Supply expenditure,

which is provided for under the Supply Act, includes all charges to the budgetary appropriations for goods and services, for transfer payments to statutory funds, and for development expenditure. Charged expenditure such as pensions, retiring allowances and gratuities are obligatory payments under the law and do not require to be appropriated annually.

6.    BUDGET PLANNING AND BUDGET STEPS

6.1    PLANNING

Planning for the annual budget begins at the ministrial/departmental level. This means each ministry/department has to review current operations, prepare the programs it wishes to implement for the next financial year and ensure that these programs are in line with the current National Development Plan as well as the aspirations of the Government.

6.1    BUDGET STEPS

The budget year is from 1st January to 31st December. Preparation of the annual expenditure budget starts early in the year, when individual departments review current operations, program objectives and future plans in relation to the next budget.

Usually in March/April of each year the Treasury issues a circular for the preparation of the expenditure budget estimates for the following year. The circular, among other things, outlines budget policy, the procedures for the preparation of the budget, the deadline for submission, and the maximum amount of increases to be allowed, if applicable.

Before the end of July deadline for submission of budget, departments have to submit their proposed expenditure budget estimates to the budget unit of the Treasury through their appropriate ministries. The ministries are required to examine and analyse budget submissions and hold preliminary hearings with their respective departments.

After the ministries have conducted their budget hearings, and are satisfied with the proposed expenditure budgets prepared by each department, they will send their overall budget to the budget unit of the Treasury which serves as the secretariat for the Budget Committee. The Budget Committee will then discuss and make recommendations as to the amount of funds to be allocated to ministries/departments for the coming year to the Sultan In-Council for final approval.

The respective departments prepare their revenue budgets for submission in accordance with Treasury instructions.

After the annual budget revenue and expenditure has been passed by the Sultan-in-Council, usually in the month of December, the Director of Financial Services issues the Treasury Warrant in early January, authorising expenditure to the extent approved in the budget.

7.    BUDGET IMPLEMENTATION

7.1    ROLE OF DEPARTMENTS IN SPENDING AND CONTROL

Every public officer who is charged with the duty of collecting, receiving or accounting for, or who in fact collects, receives or accounts for any public money or is charged with the duty of disbursing, or who does in fact disburse any public moneys, and every public officer who is charged with the receipt, custody or disposal of, or the accounting for, public stores is an 'accounting officer'. All accounting officers are required to familiarise themselves and comply with such Enactments and Subsidiary Legislation, Government Gazettes and circulars as relate to their financial duties, and are held accountable for their actions.

The accounting officer authorised by warrant issued by the Director of Financial Services to incur public expenditure is designated as 'controlling officer1. Therefore, it is his duty to exercise strict economy over the votes under his control. Money shall not be spent merely because it has been voted. In particular a 'controlling officer' shall:

An accounting officer who fails to perform his duties may be surcharged.

7.2    INTERNAL CONTROLS

Accounting and controlling officers are responsible for financial accountability. Although there are no internal audits in government ministries/ departments, steps taken ensure that internal controls do exist at various levels.

8.    BUDGET REPORTING AND EVALUATION

8.1    ROLE OF DEPARTMENTS

The control of expenditure in ministries/departments is entrusted to controlling officers. The officers are required to record details of all commitments and all expenditures incurred in a Vote Book. At regular intervals, controlling officers reconcile their Vote Books with the Treasury Ledgers based on a monthly statement of expenditure issued by the Treasury. This statement facilitates the preparation of the annual accounts.

Controlling officers responsible for 'Other Charges Special Expenditure' periodically review each item of expenditure to ascertain whether the sums voted are sufficient to enable the individual works or services to be completed. Where provisions are expected to be insufficient, applications for additional provisions should be made to the Minister of Finance promptly.

In the case of 'Other Charges Annually Recurrent Expenditure', controlling officers are required to ensure that expenditure incurred during each half year does not, without special reasons, exceed one-half the amount of the vote for the year. Wherever practicable a portion of the vote is reserved at the beginning of each year to meet contingencies. Departments are, therefore, responsible for establishing their own review and control systems to ensure compliance with laws and regulations governing appropriations and the expenditure of funds.

9.    THE NATIONAL ACCOUNTING SYSTEM

The Director of Financial Services is the head of the Treasury with authority in matters of accounting procedure over the accounts of the Government. For example, the introduction of new accounting records, forms and documents or the modification of existing accounting records, forms and documents are subject to his approval. The Director's principal functions are to safeguard, account for and be the custodian for all Government collections of revenue and trust funds. He is also responsible for all disbursments and for the preparation of the annual accounts of the Government.

9.1    TYPE OF ACCOUNTING SYSTEMS

As required by law, government accounting is on a "cash" basis under which revenues are recorded in the accounts in the period in which the cash is received and expenditures are accounted for when the actual disbursments are made.

9.2    SPECIFIC LEGISLATION-THE CONSOLIDATED FUND

Section 58 of the Constitution, states that all revenues and moneys howsoever raised or received by the Government from whatsoever source shall, subject to the Constitution and any witten law, be paid into and form one fund to be known as the Consolidated Fund.

Section 6 of the Consitution Financial Procedure Order provides for three separate accounts underthe Consolidated Fund i.e. the Consolidated Revenue Account, the Consolidated Loan Account and the Consolidated Trust Account.

Since Brunei Darussalam does not have any public debt, there was no need to create a Loan Account and the Consolidated Fund, therefore, comprises two accounts only :

9.3    ACCOUNTING STANDARDS

The accounting operations of the Government are under the general management, supervision, control and direction of the Minister of Finance. It is the duty of the Director of Financial Services as head of the Treasury to issue instructions and directions on all matters relating to financial affairs, ensure that a proper system of accounting is established and appropriate precautions are instituted against losses by fraud or negligence in departments, and ensure that accounting procedures comply with generally accepted accounting principles and standards. The Constitution Financial Procedure Order defines the scope and format of the Government accounts, while the Financial Regulations and the Director of Financial Services Circulars Treasury Instructions provide general guidelines.

10.    PRODUCTION OF THE ACCOUNTS

Section 14 of the Constitution Financial Procedure Order requires that the annual accounts be prepared by the Treasury as soon as practicable after the end of every financial year for the purpose of audit. Section 92 of the Audit Act states that in the event of any such statement not being received within a period of seven months after the close of the financial year to which it relates, the Auditor General shall submit a report to the Sultan In-Council. So far, no such report has been issued because the annual account is usually received within the prescribed period.

10.1    STEPS IN THE ACCOUNTING PROCESS

Heads of Departments are personally responsible for the prompt collection of all revenue relating to their departments. They are obliged to pay the whole amount of revenue collected daily or at the earliest possible opportunity, either into the bank to the credit of the Government, or into the Treasury/Sub-Treasury. Whenever collections are paid into the Bank or Treasury/ Sub-Treasury, the bank paying-in-slips or a Collector's Statement together with the original sheet of the Cash Book and the duplicate receipts will be presented to the Treasury/Sub-Treasury in support of the cash. The collector's statement will summarise the collections under the relevant revenue Heads and Sub-Heads.

Disbursements can only be made in the Treasury/Sub-Treasury based on Payment Vouchers together with Posting Slips prepared by Heads of Departments. The Payment Vouchers are to be supported by Government Indents and Original Invoices or Progress Certificates or Claims Certificates. The officers who sign the Payment Vouchers are responsible for ensuring that the services specified have been duly performed; that the prices charged are either according to contracts or appproved scales, or are fair and reasonable according to current local rates; that authority has been obtained as quoted;

that the calculations and extensions have been verified and are arithmetically correct; that the persons named in the Payment Vouchers are those entitled to receive payment; that stores purchased have been fully taken on charge or are accounted for as appropriate; that all deductions due to be made have been effected; and that the Payment Vouchers are properly classified in accordance with the expenditure Heads and Sub-Heads.

The main function of the Treasury/Sub-Treasury is to record the receipts of revenues and payments of expenditures into the Receipt/Payment Cash Book. Based on the collector's statement revenues collected and the posting slips expenditure made prepared by Heads of Departments and submitted to the Treasury/ Sub-Treasury, the Treasury posts these revenues and expenditures by personal computer into their respective ledgers according to the relevant Heads and Sub-Heads. This is where the accounts are processed, compiled and consolidated in order to produce the annual accounts. The Treasury also maintains a subsidiary ledger for the purposes of housing loans, conveyance loans, personal advances, and miscellaneous advances. In addition, the processing of the payroll is done in the Treasury by its computer payroll section based on the input forms submitted by ministries/departments.

10.2    THE SCOPE OF THE PUBLIC ACCOUNTS

The public accounts of Brunei Darussalam comprise the Annual Account of the Government, which is prepared by the Director of Financial Services. It covers the financial transactions of Government during a particular financial year undertaken by or on behalf of a ministry/department. The Government, as an accounting entity, includes all ministries and departments.

The basis of the Government accounting is provided in the relevant provisions of the Constitution and the Constitution Financial Procedure Order. It is based on the consolidated fund concept of accounting. As provided by law, the accounts to be presented for audit shall be:

10.3    FORMAT OF THE PUBLIC ACCOUNTS

The balance sheet shows the cash and investments held in respect of the revenue and trust accounts of the Consolidated Fund. Since Government accounting is on a cash basis, only investments held for specific trust purposes are reported in the balance sheet. The purchase of assets and costs of capital projects are treated as expenditures at the time of acquisition or construction.

The Annual Account is signed by the Director of Financial Services and one of his senior staff, and presented in one volume, which contains the statement of assets and liabilities and is supported by summaries of financial statements.

11.    MONITORING MECHANISMS

It has been indicated earlier in the report that the controlling officers and the Treasury are responsible for monitoring the performance of the budget. Controlling officers ensure that expenditure does not exceed the limits imposed by Treasury warrants. Furthermore, they are also responsible for preparing management information such as statements of 'arrears of revenue' and 'irrecoverable revenue'. The Treasury is responsible for monitoring the performance of the budget and, at the same time, keeps surveillance over all payments.

11.1    ROLE OF THE SAI

The SAI has no direct reponsibility for monitoring the performance of the budget and the existing management information systems. However, it is the duty of the SAI to report on mismanagement in government ministries/ departments, improper payments and authorisation, inadequate or poor record-keeping and weak systems of controls. To ensure public accountability, the SAI provides an independent assessment of the financial and administrative operations of government ministries/departments.

12.    CONCLUSION

The Government is constantly upgrading its accounting systems. It has been proposed that the Government accounting systems should be fully computerised in the near future. At the moment it has a computerised payroll system only and two stand alone systems revenue/expenditure ledgers and payment using personal computers. Because of the Government's intention to computerise, the SAI has embarked on a continuous training program for its officers in new auditing techniques and methodologies especially in the field of computer audit. The Government is also planning a privatisation program of some of its departments which is bound to generate some changes in the overall Government accounting systems.