CHAPTER 1

Overview of Government Accounting

Government Accounting
- encompasses the process of analyzing, recording, classifying, summarizing, and
communicating all transactions involving the receipt and disposition of government funds
and property, and interpreting the results thereof.
- Income and disbursements of government funds.
- Encompasses sources and utilization or disposition of funds
- Encompasses responsibility, accountability and liability of entities entrusted with
government funds and properties
Objectives of government accounting are:
1. To produce information concerning past operations and present conditions;
2. To provide a basis for guidance for future operations;
3. To provide for control of the acts of public bodies and officers in the receipt, disposition, and
utilization of funds and property; and
4. To report on the financial position and the result of operations of government agencies for
the information of all persons concerned.
 Enable users to determine the “service potentials” of the Agency’s resources

Like the accounting of business entities, government accounting is also a process of

producing information that is useful in making economic decisions.

3 Types of Governmental Organizational Units

1. National Government Unit
- are agencies that includes all departments, bureaus, offices, boards, commissions, councils,
states colleges and universities
2. Local Government Unit
- political subdivisions of the Philippines having substantial control over local affairs,
consisting of provinces, cities, municipalities ad barangays
3. Government Owned or Controlled Corporations
- are agencies organized by law or pursuant to law, vested with functions relating to public
needs whether or propriety in nature, owned by the government directly or through its
instrumentalities either wholly or where applicable as in case of stock corporation, to the
extent of at least 51% of its capital

Government Business Enterprise (GBE) covered by the accounting standards issued by IFRS/PFRS.
1. Power to contract its own name
2. Financial and operating authority
3. Sale of goods/services for profit
4. Not reliant on continuing gov’t fund
5. Controlled by public sector entity

Development of Philippine Public Sector Accounting Standards

 1. Applicability of IPSAS
- Alignment of PPSAS to IPSAS provide quality accounting standards thereby
enhancing the quality and uniformity in financial reporting by Philippine Public
Sector
- Ensures accountability, transparency, and comparability of financial information
with other public sector entities around the world
2. Exposure draft of PPSAS
- Consideration and commenting of interested parties in reasonable time
3. Fundamental Issues
- Disclosure requirement is considered to be in conflict with the Philippine laws, rules
and regulations
4. Statutory Authority
5. Disclosure requirements
- May be amended for improving fair representation
6. PPSAS numbering
- 101 (PPSAS with no equivalent IPSAS)
- 100 (PPSAS with equivalent IPSAS)
7. Financial reporting issues not dealt with by IPSAS
8. Submission of draft to PSASB for consideration of the COA
9. If considered appropriate, focus group discussions will be held to obtain further opinions on
issues identified by the exposure process.
Government accounting, however, places greater emphasis on the following:
1. Sources and utilization of government funds; and
2. Responsibility, accountability, and liability of entities entrusted with government funds and
properties.
Sources of government funds include:
1. Receipts from taxes and other fees
2. Borrowings
3. grants from other governments and international bodies
Utilization of government funds include:
1. Expenditures on programs, projects, unanticipated losses from calamities and the like.

Accounting Responsibility
- Emanates from the Constitution laws, policies, rules and regulations. The
- Keeping of the general accounts of the Government, promulgation of accounting
rules, and the submission of reports covering the financial condition and operation
of the government.

Responsibility over Government Funds and Property

1. The head of a government agency
 is directly responsible in implementing policies
 is primarily responsible for government resources entrusted to his agency
2. All those who are exercising authority over a government agency shall share fiscal
responsibility.
The following offices are charged with government accounting responsibility:
1. Commission on Audit (COA)
 has the exclusive authority to promulgate accounting and auditing rules and
regulations.
 keeps the general account of the government, promulgates accounting rules and
regulations, and submits to the President and Congress (not later than the last day
of September-Section 41, PD 1445)
 submits financial reports to the President and Congress.

Article XI-D, Sec. 2, Par. 2 of 1987 Philippine Constitution

The COA shall have exclusive authority, subject to limitation in this article, to:

a) Define the scope of its audit and examination,

b) Establish the techniques and methods required therefor, and
c) promulgate accounting and auditing rules and regulations, including those for
the prevention and disallowance of irregular, unnecessary, excessive,
extravagant, or unconscionable expenditures, or uses of government funds and
properties

COA, DBM and DOF Joint Circular No. 2013-1, August 6, 2013
Unified Accounts Code Structures (UACS), the consistency of account classification and
coding structures with the Revised Chart of Accounts shall be the responsibility of the COA

Responsibilities/Principal Duties of the COA

A. Examine, audit and settle all accounts pertaining to the revenue and receipts of, and
expenditures or uses of funds and property owned or held in trust by, or pertaining to, the
government
B. Recommend measures to improve the efficiency and effectiveness of government
operations
C. Keep the general accounts of the government and preserve the vouchers and supporting
papers pertaining thereto- ung nasa ending balance ng ledger, trial balance.
 Hatian ng report: National, Local, and GOCCs called Annual Financial Report.
 Within 10 years dapat i-hold before i-dispose with the approval of the National
Archive.
D. Decide any case brought before it within 60 days

2. Department of Budget and Management (DBM)

 is responsible for the formulation and implementation of the national budget with
the goal of attaining the nation’s socio-economic objectives.
Section 2, Chapter 1, Title XVII, Book IV of the Administrative Code of the Philippines (EO 292)
The DBM shall be responsible for:
1. Formulation and implementation of the National Budget with the goal of attaining our
national socio-economic plans and objectives
2. Efficient and sound utilization of government funds and revenues to effectively achieve
country’s development objectives
Joint Circular No. 2013-1, August 6, 2013
Unified Accounts Code Structures (UACS), the validation and assignment of new codes for
funding source organization, sub-objects codes for expenditure items shall be the responsibility of
the DBM.
Validation of new program, activity, project codes shall be decided jointly by the proponent
agency and DBM
Responsibility of Department of Budget and Management
A. Formulation and implementation of the National Budget
B. Fulfill its mandate is the development, administration and maintenance of a unified
government Position Classification and Compensation System (major function)
C. Formulates the overall resource application strategy to match the government’s
macroeconomic policy;
D. Prepares the medium-term expenditure plan, indicating the programming, prioritization,
and financing of capital investment and current operating expenditure requirements of
medium-term sectoral development plans;
E. Undertakes the formulation of the annual national budget in a way that ensures the
appropriate prioritization and allocation of funds to support the annual program of
government;
F. Develops and administers a national accounting system essential to fiscal management and
control;
G. Conducts a continuing study of the bureaucracy and assesses as well as makes policy
recommendation on its role, size, composition, structure and functions to establish a
government bureaucracy imbued with a spirit of public service;
H. Establishes the rules and procedures for the management of government organization
resources i.e., physical, manpower and other resources, formulates standards of
organizational program performance; and undertakes or provides services in work
simplification or streamlining of systems and procedures to improve efficiency and
effectiveness in government operations;
I. Conceptualizes and administers the government’s compensation and position classification
plan; and
J. Monitors and assesses the physical as well as the financial operations of local government
units and Government-Owned and/or Controlled Corporations.

3. Bureau of Treasury (BTr)

 functions under Department of Finance
 is cash custodian of the government
  is authorized to received and keep national funds and manage and control the
disbursement thereof
 is authorized to maintain accounts of financial transactions of all national
government offices, agencies, and instrumentalities.
 consistency of accounts classification with government finance statistics
 plays a pivotal role in the cash operations of the national government.
 Shall control and monitor the Notice of Cash Allocation released by the DBM; as well
as the bank transfers it makes in replenishing its Modified Disbursement System
accounts (MDS) accounts.
Revised Administrative Code
BTr is authorized to:
1. Receive and keep national funds, manage and control the disbursements
2. Maintain accounts of financial transactions of all national government offices, agencies and
instrumentalities
Joint Circular No. 2013-1, August 6, 2013
Unified Accounts Code Structures (UACS), the consistency of accounts classification and
coding standards with the Government Finance Statistics (GFS) shall be the responsibility of
Department of Finance- BTr
Responsibilities of Bureau of Treasury
A. Cash custody and control of Disbursements
B. Act as principal custodian of the financial assets of the national government.
C. Makes funds available for various government programs and projects
D. Assist in the formulation of policies on borrowing, investment, and capital market
development: in managing cash resources; collecting taxes; and in controlling and servicing
public debt.

4. Government Agencies
 are responsible in directly implementing the projects of, and performing the
functions delegated by, the government
 shall maintain accounting books and budget registries
 are required by law to have accounting units/division/department.
Accounting personnel shall:
1. Maintain and keep current the accounts of the agency
2. Provide advice on the financial condition and status of the appropriation and allotment of
the agency as its Head may require
3. To develop and conduct procedures designed to meet the needs of management
Note: Failure to comply with these requirements is sufficient ground for dismissal from the
government service

Government agency
 - refers to any department, bureau, or office of the national government, or any of its
branches and instrumentalities, or any political subdivision, as well as any government
owned or controlled corporation (GOCC), including its subsidiaries, or other self-governing
board or commission of the government.

The GAM for NGAs

An “old” government accounting system had been used for about five decades
before it was replaced by the New Government Accounting System (NGAS) in 2002. However, on 01
January 2016, the NGAS was replaced by the Government Accounting Manual for National
Government Agencies (GAM for NGAs).

 The Government Accounting Manual for National Government Agencies (GAM for NGAs) is
promulgated by the COA under the authority conferred to it by the Philippine Constitution.
(Article IX-D, Sec. 2, par 2)
 The GAM for NGAs was promulgated primarily to harmonize the government accounting
with the International Public Sector Accounting Standards (IPSAS). The IPSASs are based on
the IFRS.
 Before GAM, NGAS or National Government Accounting Standards.

The GAM for NGAs was promulgated primarily to harmonize the government accounting
standards with international accounting standards, particularly the International Public Sector
Accounting Standards (IPSAS). The IPSASs are based on the International Financial Reporting
Standards (IFRS).

The Philippine Government has adopted the IPSAS through Philippines Public Sector
Accounting Standards (PPSAS). The provisions of the PPSAS are incorporated in the GAM for NGAs.

Legal Basis of GAM for NGAs The GAM for NGAs is promulgated by the
Commission on Audit (COA) based on the
authority conferred to it by the Philippine
Constitution.
Coverage of GAM for NGAs The GAM for NGAs provides the basis concept
to be used in:

1. Preparing general purpose

financial statements in accordance with
the PPSAS and other financial reports
as may be required by laws, rules and
regulations; and
2. Reporting of budget, revenue, and
expenditure in accordance with laws,
rules, and regulations

Objective of GAM for NGAs The GAM for NGAs aims to update the
following:
 1. Standards, policies, guidelines, and
procedures in accounting for
government funds and property;

2. Coding structure and accounts; and

3. Accounting books, registries, records,

forms, reports, and financial
statements.

Objectives of the GAM for NGAS

To update the following:
1. Standards, policies, guidelines and procedures in accounting for government funds and
properties
2. Coding structures (RCA or the Revised Chart of Accounts containing Account code
composing 8 digits, account title and account description) and accounts
3. Accounting books, registries, records, forms, reports, and financial statements.
GAM shall be used by National Government Agencies in:
1. Preparation of the general purpose financial statements in accordance with the PPSAS and
other financial reports as may be required by laws, rules, and regulations
2. Reporting of budget, revenue, and expenditure in accordance with laws, rules, and
regulations
Basic Accounting and Budget Reporting Principles
The financial records and reports of government entities shall comply with the following:

1. Compliance with Philippine Public Sector Accounting Standards (PPSAS) and relevant laws,
rules, and regulations;
 Adoption of 25 PPSAS effective January 1, 2014 (COA Resolution No. 2014-003,
January 24, 2014)
2. Accrual basis of accounting;
 Under accrual basis of accounting, transactions are recognized when they occur
(and not only when cash is received or paid). Therefore, transactions are recognized
in the periods to which they relate.
 Elements recognized under accrual basis of accounting are assets, liabilities, net
assets/equity, revenue and expenses
3. Budget basis for presentation of budget information in the financial statements in
accordance with PPSAS 24
 Comparison of budget amounts and actual amounts arising from execution of the
budget to be included in the financial statements of entities.
 Disclosure of an explanation of the reasons for material differences between the
budget and actual amount
 IPSAS 24, Presentation of Budget Information in Financial Statements
 4. Revised Chart of Accounts prescribed by COA;
5. Double entry bookkeeping;
6. Financial statements based on accounting and budgetary records;
7. Fund cluster accounting
 Fund clusters- an accounting entity for recording expenditures and revenues
associated with a specific activity for which accounting records are maintained and
periodic financial reports are prepared.

CODE FUND CLUSTERS

01 Regular Agency Fund

02 Foreign Assisted Projects Fund

03 Special Account-Locally Funded/Domestic Grants Fund

04 Special Account-Foreign Assisted/ Foreign Grants Fund

05 Internally Generated Funds

06 Business Related Funds

07 Trust Receipts

For example, separate accounting books (Journals and Ledger) and budget registries shall
be maintained for Regular Agency Fund. Another separate accounting books and budget registries
shall be maintained for Foreign Assisted Project Funds, and so on.

Components of General-Purpose Financial Statements

General-Purpose Financial Statements are those intended to meet the needs of users who are
not in a position to demand reports tailored to meet their particular information needs.

The complete set of general-purpose financial statements consists of:

1. Statement of Financial Position
2. Statement of Financial Performance
3. Statement of Changes in Net Assets/ Equity
4. Statement of Cash Flows
5. Statement of Comparison of Budget and Actual Amounts
6. Notes to the Financial Statements, comprising a summary of significant accounting policies
and other explanatory notes.