MODULE 1: INTRODUCTION TO GOVERNMENT ACCOUNTING

1.1 General Provisions, Basic

Standards and Policies
Definition (Sec. 109, P.D. 1445)

• 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 result
thereof.

Objectives of Government Accounting (Sec. 110 P.D. 1445)

• To produce information concerning past operations and present conditions;
• To provide a basis for guidance for future operations;
• To provide for control of the acts of public bodies and offices in the receipt,
disposition and utilization of funds and property; and
• To report on the financial position and the results of operations of government
agencies for the information and guidance of all persons concerned.

Public Sector Accounting Standards Board (PSASB)

• was created by COA in 2008 in order to formulate and implement the Philippine
Public Sector Accounting Standards (PPSAS) and establish linkages with
international bodies, professional organizations and academe on accounting related
fields on financial management.

Philippine Public Sector Accounting Standards (PPSAS)

• are accounting standards based on the International Public Sector Accounting

Standards (IPSAS) bases of which are the IFRS.
• Processes and considerations in the development of the PPSAS :
o applicability of the IPSAS to Philippine setting.
o Philippine application guidance was issued to change the accounting
principle of IPSAS found to be in conflict with Philippine laws, rules, and
regulations.
o for improving fair presentation, if significant, disclosure requirements
were amended.
o assigned the same number as the IPSAS, but if the PPSAS has no
IPSAS equivalent number, a series starting with 100 will be used and
shall be withdrawn if IPSAS issued an equivalent standard.
o relevant accounting standards were researched to deal with financial
reporting issues not dealt with IPSAS.
o submission of a draft for consideration of the COA, if the standard was
exposed to significant changes and unresolved issues.

1.1.1 Responsibility, Accountability

and Liability (over Government
Funds and Property)
Responsibility, Accountability and Liability (over Government Funds and
Property)

• Responsibility
o Government resources shall be utilized efficiently end effectively in
accordance with the law.
o The head of the government agency shall be directly responsible in
implementing this policy and the resources entrusted to them.
o All those exercising authority over a government agency shall share fiscal
responsibility.

• Accountability
o A government officer entrusted with the possession of government
resources is responsible for the safekeeping and therefore should be
properly bonded.
o Transfer of funds from one officer to another shall be made after
authorization from the COA, which is properly documented in invoice and
receipt.

• Liability
o Unlawful use of government resources shall be the personal liability of
the employee found to be directly responsible.
o Every accountable officer shall be liable for all losses arising from the
unlawful use or negligence in safekeeping of resources.
o No accountable officer shall be relieved from liability merely because he
acted under the the direction of a superior (unless he informed in writing
his superior of the illegality of such transaction, wherein he will be
secondarily liable).
o An accountable officer shall immediately notify the COA of any loss of
government funds due to "force majeure" within 30 days from its
occurrence.

1.1.2 Accounting Responsibility

and Responsibility Accounting
Government Offices Charged with Accounting Responsibility
• Commission on Audit (COA)shall:
o keep the general accounts of the government;
o promulgates accounting rules and regulations and
o submits reports to the President and Congress within the time fixed by
law.
• Department of Budget and Management (DBM) shall be responsible for the:
o formulation and implementation of the National Budget;
o responsible for the efficient and sound utilization of government funds
and revenues and
o validation and assignment of new account codes.
• Bureau of Treasury (BTr) shall :
o receive and keep the national funds and manage and control the
disbursements;
o maintains accounts of all financial transactions of all national government
offices/agencies .
• Government Agencies
o responsible in directly implementing the projects of, and performing the
functions delegated by the government.
o required by law to have budget and accounting departments/divisions
who shall:
▪ maintain and keep current the accounting books and budget
records reconciled with COA and DBM
 ▪ provide advice on the financial condition and status of the
appropriations and allotments of the agency as its Head may
require, and
▪ develop and conduct procedures designed to meet the needs
of management.

•
o classified according to the type of governmental organizational unit:
▪ National Government Agencies (NGAs)
▪ Local Government Units (LGUs)
▪ Government-Owned and Controlled Corporations(GOCCs)
and their subsidiaries
o shall adopt the PPSAS except for agencies classified as Government

Business Enterprise or GBEs downloadwhich shall adopt the IFRS.

Concepts of Responsibility Accounting

• Responsibility accounting involves reporting data on revenues and cost controlled by
a manager.
• A responsibility reporting system involves the preparation of a report for each level of
responsibility wherein actual costs is compared with flexible budget data.
• Evaluation of a manager’s performance is based on matters directly under his
control.

1.1.3 Basic Accounting and Budget

Reporting Principles as provided
by the GAM
Basic Accounting and Budget Reporting Principles

• GAAP in accordance with the PPSAS and pertinent laws, rules and regulations.
• Accrual basis of accounting
• The Budget basis for the presentation of budget information in the financial
statements in accordance with PPSAS 24. (comparison of budget and actual
amounts)
• Revised Chart of Accounts prescribed by the Commission on Audit.
• Double-entry bookkeeping
• Financial statements based on accounting and budgetary records.
• Fund cluster accounting - books of accounts and budget records are maintained
according to their type of fund.
• Fund cluster -accounting entity for recording expenditures and revenues associated
with a specific type of activity.
• General Purpose Financial reporting

1.1.4 The Government Accounting

Manual (GAM) for NGAs
I would like to present to you our Bible in Government Accounting . This is being used
as a guide by all government agencies in accounting for all their transactions.
The Government Accounting Manual (GAM)
 • is prescribed to be used by all national government agencies and local government
units.
• shall serve as as a guide in the:

•
o preparation of the general purpose financial statements in accordance
with the PPSAS and other financial reports
o reporting of budget, revenue, and expenditure in accordance with the
PPSAS
• aims to update the :
o standards, policies, guidelines, and procedures in accounting for
government funds and property
o coding structure and accounts
o accounting books, registries, records, forms, reports, and financial
statements

Legal Basis

• Article IX-D, Sec 2 par (2), 1987 Philippine Constitution

• Mandates COA to promulgate Accounting rules and regulations

1.2 The Philippine Budget Process

Government Budgeting
• refers to methods and practices of government planning, adopting and executing
financial policies and programs.
Government Budget

• refers to a plan for financing government activities for a fiscal year,

• it is a definite proposal of estimates of receipts and expenditures.

Budgetary Approaches

• Bottom-Up Budgeting Approach

• Incremental Budgeting Approach

• Zero-based budgeting Approach

• Performance-Informed Budgeting

Budgetary Approaches
Budgetary Approaches

• Bottom -Up Budgeting Approach -several parties participates in the preparation of

the budget, starting from the lowest to the highest level of the Government. This is
the opposite of " top-down" budgeting wherein the budget preparation starts from the
agency heads.

• Incremental Budgeting Approach -current year budget is based on previous year’s

budget, which is just adjusted for any variances experienced in the past. It also
called the "roll over " approach and this is prone to abuse.

• Zero-based budgeting Approach-the current year' budget is formulated without

regard to the previous year’s budget. Government agencies are required to justify
their current years programs and expenditures. This is a "back -to-zero" or "clean
slate" approach. It promotes efficient and effective utilization of funds.

• Performance-Informed Budgeting- uses performance information to deciding

where the funds will go.

Types of Budgets

• Special budget
• Annual budget
• Line Item budget
• Performance Budget
• Obligations budget

Types of Budgets and Budgetary

Terms
Types of Budgets and Budgetary Accounts

• Supplemental budget - supplements or adjust the previous budget which is

deemed inadequate for its intended purpose.
 • Annual budget- covers a period of one year and forms the basis for the annual
appropriation.
• Special budget - provides for items not adequately covered or not included in the
GAA.
• Line Item budget - focuses on specific expenditures such as salaries and wages,
travel expenses, freight, materials, supplies and equipment.
• Performance Budget- a plan of activities to be undertaken including their related
costs, with the emphasis on meeting targets and desired results. The main focus in
on the work to be done or services to be rendered.
• Obligations budget-focuses on expenditures in incurred in the current year which
are to be paid either in the same year or in the following year.

Budgetary Accounts

• Appropriation - authorization by a legislative body to allocate funds for a specified

purpose
• Allotment- authorization to agencies to incur obligations or the "obligational
authority"
• Obligation - amount contracted by an authorized officer for which the government is
liable.
• Disbursements- actual amount paid out of the budgeted amount.

Kinds of Appropriations

• New General Appropriations - authorization made by a legislative body to allocate

funds for purposes specified by a legislative body or similar authority.
• Continuing Appropriations- authorizations to support the incurrence of obligations
beyond the budget year (e.g., multi-year construction projects).

• Supplemental Appropriations-additional appropriations to augment the original

appropriations which proved to be insufficient.

• Automatic Appropriations-authorizations programmed annually which do not

require periodic action by Congress.

• Unprogrammed Funds-standby appropriations which may be availed only upon the

occurrence of certain instances.
• Retained Income Funds-collections which the agencies can use directly in their
operations
• Revolving Funds -receipts from business-type activities of agencies which are
authorized to be constituted as such. These are self-liquidating and all obligations
and expenditures incurred by virtue of said business-type activity shall be charged
against the fund.
• Trust Receipts- receipts by a government agency acting as an agent.

1.2.1 The Philippine Budget

Process and the National Budget
National Budget (Government Budget)
• is the government's estimate of the sources and uses of government funds within a
fiscal year.
• is the basis for expenditures and is the government's key instrument for
implementing its socio-economic objectives.
• The Bottom-Up Budget approach is used by the Philippine Government in
preparing its budget. Several parties participate in the preparation of the budget,
starting from the lowest to the highest level of the Government and even the ordinary
citizens.
 • In 2011, The Philippine Government adopted the"Zero-based budgeting"
approach. The current year's budget is formulated without regard to the previous
year’s budget.

Let us now discuss the budget cycle in detail.

Take note of the steps in each budget process.

Budget Preparation
Budget Preparation

• This is where the estimates for revenues and expenditures are prepared
• The main agency involved is the Development Budget Coordination Committee
(DBCC) composed of the following economic agencies:
o DBM
o Dept. of Finance
o NEDA
o BSP
• and the Office of the President for oversight
• It starts with the "Budget Call" for all government agencies which contains the
budget parameters.
• Each agency is required to submit its detailed budget proposals in the Technical
Budget Hearings
• After consolidation, it is presented to the President and Cabinet members for further
refinement and prioritization.
• The DBCC prepares the finalized budget proposal and submits the same to the
President and cabinet members for approval.
• The President submits the budget to Congress for approval.

Budget Legislation
Budget Legislation

• The President submits the annual budget proposal to Congress.

 • It starts with the enactment of the Bill. Congress assigns the General Appropriation
Bill (GAB) to the Committee on Appropriations (CA) .
• Proposed budget is reviewed by the CA. Each agency is summoned to justify their
budgets.
• The CA presents to the house body the proposed budget. It passes through (3)
readings.
• The Congress submits it to the Senate Finance Committee (SFC) for hearings and
deliberation.
• The SFC submits amendments to the GAB to the Senate for approval.
• The Bicameral Committee composed of both houses convene to resolve the
differences.
• The common version is submitted to the President, for " line item veto power ".
• The President signs it to the Law " The General Appropriations Act (GAA).

Budget Execution
Budget Execution

• This is the implementation of the GAA.

• This contains the agencies targets and plans for the financial year.
• Allotments are issued, chargeable against the regular agency budget by the DBM.
• Agencies may submit request for availment from special purpose funds.
• Agencies are mandated to submit based on the National Expenditure Program
(NEP), the Budget Execution Documents (BEDs)
• Cash releases are made to agencies to cover obligations that are current or carried
forward from the previous year by the Bu. of Treasury (BTr) through the Budget
Disbursement Authorizations (BDAs).

Budget Execution Documents and

Authority
Budget Execution Documents (BEDs)
• These are reports used in the releasing of allotments to government agencies.

General Appropriations Act Release Document (GAARD)

• serves as obligational authority for the comprehensive release of budgetary items

appropriated in the GAA categorized as " For Comprehensive Release".

Special Allotment Release Order (SARO)

• covers budgetary items under "For Later Release" subject to compliance of required
documents or clearance. Ex. Calamity Fund

General Allotment Release Order (GARO)

• comprehensive authority issued to all national government agencies, in general, to

incur obligations not exceeding an authorized amount for a certain purpose during a
specified period. It covers expenditures common to most agencies without need of
special clearance. Ex. Retirement and Life Insurance Fund

Budget Disbursement Authority's (BDAs)

 • These are documents needed for government agencies to have access to the
government funds.

Notice of Cash Allocation (NCA)

• authority issued by the DBM to central, regional and provincial offices and operating
units to cover their cash requirements.
• The NCA specifies the maximum amount of cash that can be withdrawn from the
government servicing bank (GSB) in a certain period. This is based on the agency's
Monthly Cash Program (MRP).

Notice of Transfer of Allocation (NTA)

• authority issued by an agency's Central Office (CO)to its regional operating units
(ROU) to cover the latter’s cash requirements.

Non-Cash Availment Authority (NCAA)

• authority issued by the DBM to agencies to cover the liquidation of their actual
obligations incurred against available allotments for availment of proceeds from loan/
grants through supplier's credit/ constructive cash.

Cash Disbursement Ceiling (CDC)

• authority issued by the DBM to agencies with foreign operations like the DFA
allowing them to use income collected by their foreign service post to cover their
operating requirements.

Note:
Disbursements are most commonly made through checks that are chargeable
against the account of the Bureau of Treasury under the scheme called "Modified
Disbursement System (MDS) Checks". There are also other modes of disbursement
available that we will discuss later.

Budget Accountability
Budget Accountability

• Agencies report their their actual physical and financial performance through the
submission of Budget Financial Accountability Reports (BFARs).
• The Commission on Audit (COA) is in charge of assessing agency performance.
• Those that are excessive , inappropriate or illegal are not passed in audit.
• COA recommends means for setting them right if such is still possible.
• Financial Statement of agencies are submitted to DBM and COA on a quarterly and
annual basis which shows how these agencies used up their allotments or cash
allocations.

BFARs
Budget and Financial Accountability Reports (BFARs)
These are reports submitted by the government agencies to DBM and COA to monitor
the conformance of actual results with the planned targets.
Monthly Report of Disbursements (MRD)

• shows the disbursements of the entity during the month, classified according to type
of disbursement authority.
• This report is submitted 30 days after the end of each month.

Quarterly Physical Report of Operation (QPRO)

• shows the agency's physical accomplishments in a given quarter vs its physical

targets.
• This report is submitted within 30 days after the end of each quarter.

Statement of Appropriations, Allotments, Obligation, Disbursements, and

Balances (SAAODB)

• shows the agency's authorized appropriations, allotments received, obligations

incurred, disbursements made, the balance of unreleased appropriations,
unobligated allotments, and unpaid obligations.
• This report is submitted within 30 days after the end of each quarter.

Summary of Appropriations, Allotments, Obligation, Disbursements, and Balances by

Object of Expenditure (SAAODBOE)

• shows the agency's authorized appropriations, allotments received, obligations

incurred, disbursements made, the balance of unreleased appropriations,
unobligated allotments and unpaid obligations with details of expenditures.
• This report is submitted within 30 days after the end of each quarter.

List of Allotments and Sub-Allotments(LASA)

• shows the allotments received by the agency from DBM and the sub-allotments
issued by the agency's CO or RO to lower operating units.
• This report is submitted within 30 days after the end of each quarter.

Statement of Approve Budgets, Utilizations, Disbursements, and Balances (SABUDB)

• this report is prepared by agencies that have the authority to use their revenues. It
shows the Budgeted revenue, the utilizations and disbursements, and the unutilized
amounts
• This report is submitted within 30 days after the end of each quarter.

Summary of Approved Budgets, Utilizations, Disbursements, and

Balances (SABUDBOE)

• this report is prepared by agencies that have the authority to use their revenues. It
shows the Budgeted revenue, the utilizations and disbursements, and the unutilized
amounts.
• This report is submitted within 30 days after the end of each quarter.

Quarterly Report of Revenue and Other Receipts (QRROR)

 • shows the actual revenues and other receipts remitted to the Bu. of Treasury (BTr)
and deposited in authorized government depository banks in a given quarter.
• This report is submitted within 30 days after the end of each quarter.

Aging of Due and Demandable Obligations (ADDO)

• shows the name of creditors, amounts owed, and the no. of days these amounts are
outstanding.
• This report is submitted within 30 days after the end of each year.

Consolidated Statement of Allotments, Obligations, and Balances per Summary of

Appropriations (CSAOBSA)

• this report is based on SAAODB and SAAODBOE.

• This report is submitted on or before February 14 of the following year.

The DBM and COA perform periodic reviews of the agency's performance and budget
accountability and report this to the President. In case of non-submission of the reports
on time, the units concerned will be penalized by DBM by withholding their salaries.
These documents are also the basis of the COA in auditing government agencies.
These budgetary reports and other budgetary records provide information in preparing
the agency's Statement of Comparison of Budget and Actual Amounts which is one of
the components of a complete set of Financial Statements.