OVERVIEW OF GOVERNMENT ACCOUNTING

Four Sectors of the Accounting Profession

1) Public Practice - involves the rendering of audit or accounting services to more than one client on a fee
basis

2) Academe/Education - employment in an educational institution which involves teaching of accounting,

auditing, management advisory services, finance, business law, taxation, and other technically related
subjects.

3) Commerce/Industry - refers to employment in the private sector in a position that involves

decision-making requiring professional knowledge in the science of accounting. Such a position requires
the holder to be a certified public accountant.

4) Government - employment or appointment to a position in an accounting professional group in the

government or in a government-owned and/or controlled corporation, including those performing
proprietary functions, where decision-making requires professional knowledge in the science of accounting,
or where civil service eligibility as a certified public accountant is a prerequisite.
(Philippine Accountancy Act of 2004, R.A. No. 9298)

Introduction
“Government accounting encompasses the processes of analyzing, recording, classifying, summarizing and
communicating all transactions involving the receipt and disposition of government funds and property, and
interpreting the results thereof.’’ (State Audit Code of the Philippines, P.D. No. 1445, Sec. 109)

The objectives of government accounting are:

a) To produce information concerning past operations and present conditions;
b) To provide a basis for guidance for future operations;
c) To provide for control of the acts of public bodies and officers in the receipt, disposition, and utilization of
funds and property; and
d) To report on the financial position and the result of the operation of government agencies for the
information of all persons concerned.
(P.D. No. 1445, Sec. 110)

Like accounting for business entities, government accounting is also a process of producing information that is
useful in making economic decisions. Government accounting, however, places greater emphasis on the
following:
a) Sources and utilization of government funds; and
b) Responsibility, accountability, and liability of entities entrusted with government funds and properties.

➢ The sources of government funds include receipts from taxes and other fees, borrowings, and grants
from other government and international bodies.

➢ The utilization of government funds includes expenditures on programs, projects, unanticipated losses
from calamities, and the like.

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Responsibility, Accountability, and Liability over Government Funds and Property

Responsibility over Government Funds and Property

1) Government resources shall be utilized efficiently and effectively in accordance with the law. The head of a
government agency is directly responsible for implementing this policy and is primarily responsible for
government resources entrusted to his agency. Those who are entrusted with the possession of
government resources are directly responsible to the head of the agency.

2) All those who are exercising authority over a government agency shall share fiscal responsibility.
(State Audit Code of the Philippines, P.D. No. 1445)

Accountability over Government Funds and Property

1) A government officer entrusted with the possession of government resources is responsible for the
safekeeping therefore in accordance with the law. Every accountable officer shall be properly bonded.
(P.D. No. 1445 and E.O. No. 292)

2) The transfer of government funds from one officer to another shall, except as allowed by the law, be made
only after the authorization of the COA. The transfer shall be properly documented in an invoice and
receipt.
(P.D. No. 1445)

Liability over Government Funds and Property

1) The unlawful use of government resources shall be the personal liability of the employee found to be
directly responsible therefore.

2) Every accountable officer shall be liable for all losses resulting from the unlawful use or negligence in the
safekeeping of government resources.

3) No accountable officer shall be relieved from liability merely because he has acted under the direction of a
superior officer in unlawfully utilizing the government resources entrusted to him, unless, before that act, he
has notified the superior officer, in writing, that the utilization is illegal.

The superior officer shall be primarily liable while the accountable officer who fails to serve the required
notice shall be secondarily liable.

4) An accountable officer shall immediately notify the COA of any loss of government funds unforeseen
events (force majeure) within 30 days. Failure to do so will relieve the officer of liability
(P.D. No. 1445)

Main Concept:
Government resources must be utilized efficiently and effectively in accordance with the law. Government
officials are responsible for implementing this policy, are accountable for government resources in their
custody, and are liable for any loss.

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Accounting Responsibility
The following offices are charged with government accounting responsibility:
a. Commission on Audit (COA)
b. Department of Budget and Management (DBM)
c. Bureau of Treasury (BTr)
d. Government Agencies

Commission on Audit (COA)

The Commission on Audit (COA):
a. Has the exclusive authority to promulgate accounting and auditing rules and regulations.
b. Keeps the general accounts of the government, supporting vouchers, and other documents.
c. Submits financial reports to the President and Congress.

Department of Budget and Management (DBM)

The 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.

Bureau of Treasury (BTr)

The Bureau of Treasury (BTr) functions under the Department of Finance and is the cash custodian of the
government. The BTR is authorized to:
a. Receive and keep national funds and manage and control the disbursements thereof; and
b. Maintain accounts of financial transactions of all national government offices, agencies and
instrumentalities.

Government Agencies
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.
(P.D. No. 1445)

The government agencies are responsible in directly implementing the projects of, and performing the
functions delegated by, the government.

Each agency (entity) shall maintain accounting books and budget registries which are reconciled with the
cash records of the BTr and the budget records of the COA and DBM.

Government agencies are required by law to have accounting units/divisions/departments.

Note: Even a barangay (the smallest administrative division in the Philippines) is required to have an accounting unit e.g,
the barangay’s “bookkeeper.”

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Financial Reporting System of the National Government

➢ Entity – refers to a government agency, department or operating/field unit.

➢ Financial Reporting – is the process of preparation, presentation and submission of general purpose
financial statements and other reports. The objective of financial reporting is to provide information
about the entity that is useful to users for accountability purposes and decision-making.

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 January 1, 2016 the NGAS was replaced
by the Government Accounting Manual for National Government Agencies (GAM for NGAs).

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 the Philippine Public Sector Accounting
Standards (PPSAS). The provisions of the PPSAS are incorporated in the GAM for NGAs.

Since the PPSAS are based on the IPSAS, which are in turn based on the IFRSs/PFRSs, most of the concepts
that we will be learning in this book would be very familiar to you.

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Legal basis
The GAM for NGAs is promulgated by the Commission on Audit (COA) based on the authority conferred to it
by the Philippine Constitution:

Relevant provision of law:

➢ “The Commission (on Audit) shall have exclusive authority, subject to the limitations in this Article, to
define the scope of its audit and examination, establish the techniques and methods required therefor,
and 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.” (Art. IX-D, Sec. 2(2), Philippine Constitution)

Coverage
The GAM for NGAs provides the basic concepts to be used in:
a. Preparing general purpose financial statements in accordance with the Philippine Public Sector
Accounting Standards (PPSAS) and other financial reports as may be required by laws, rules and
regulations; and
b. Reporting of budget, revenue and expenditure in accordance with laws, rules and regulations.

Objective
The GAM for NGAs aims to update the following:
a. Standards, policies, guidelines and procedures in accounting for government funds and property;
b. Coding structure and accounts; and
c. Accounting books, registries, records, forms, reports, and financial statements.
(GAM for NGAs; Chapter 1, Sec. 3)

Basic Accounting and Budget reporting Principles

The financial records and report of Government entities shall comply with following:
1. Philippine Public Sector Accounting Standards (PPSAS) and relevant laws, rules and regulations;
2. Accrual basis of accounting;
- Under the 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.
3. Budget basis for presentation of budget information in the financial statements;
4. Revised Chart of Accounts prescribed by COA;
5. Double entry bookkeeping;
6. Financial statements based on accounting and budgetary records; and
7. Fund cluster accounting

ADDITIONAL INFORMATION:

Three Objectives of Government Accounting Manual:

1. Update Regulations: Update the standards, policies, regulations, and codes.

2. Update Records: Update the records, books, accounting books, and codes.
3. Update Coding Structure: Update the coding structure of the registries.

Budget Process:
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 1. Budget Preparation: The Department of Budget and Management prepares the budget, which is then
reviewed by the President.
2. Budget Legislation and Authorization: The General Appropriations Bill is enacted into law by the
legislative body (House of Representatives and Senate), becoming the General Appropriations Act
(GAA). The GAA covers most of the government's expenditures.

Budget Registries:

1. RROR (Registries of Revenue and Other Receipts): Records of government revenue.

2. RAPAL (Registries of Appropriations and Allotments): Records of appropriations and allotments.
3. RAOD (Registries of Allotments, Obligations, and Disbursements): Records of allotments,
obligations, and disbursements.
○ RAOD-PS: Personnel Services
○ RAOD-MOOE: Maintenance and Other Operating Expenses
○ RAOD-FE: Financial Expenses
○ RAOD-CO: Capital Outlays
4. RBUD (Registries of Utilization and Disbursements): Records of utilization and disbursements.
○ RBUD-PS: Personnel Services
○ RBUD-MOOE: Maintenance and Other Operating Expenses
○ RBUD-FE: Financial Expenses
○ RBUD-CO: Capital Outlays

Budget Execution:

● Budget execution funds are being spent.

Budget Accountability:

● The agency monitors the proper disbursement of the budget.

Budget Process or Budgetary Procedure:

1. Budget Preparation and Presentation: Estimation of government revenues, determination of

budgetary priorities, and activities. The budget preparation starts with the issuance of a budget call
issued by the Department of Budget and Management.
2. Budget Legislation and Authorization: The enactment of the General Appropriations Bill into law.
Appropriations are approved by the legislative body in the form of the GAA, which covers most of the
expenditures.

Government Accounting Cycle

1. Appropriation:

● Authorization by a legislative body to allocate funds for a specific purpose.

● No journal entry is made.
● Affects budget registries.

2. Allotment:

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 ● Authorization issued by DBM to enable an agency to incur obligations up to a specific amount within the
legislative appropriation.
● DBM specifies the estimated allotment for each expense.
● No journal entries are made.
● Affects budget registries.

3. Incurrence of Obligation:

● Commitment by an agency that binds the government to the eventual payment of a sum of money.
● No journal entries are made.
● An obligation request and status are issued before incurring obligations.
● Affects RAOD (Registries of Allotments, Obligations, and Disbursements).

4. Disbursement Authority or Notice of Cash Allocation (NCA):

● Authorization issued by DBM to government agencies to withdraw cash from the national treasury
through checks or other authorized methods.
● NCA contains the maximum amount that a government agency can withdraw from the bank.

5. Disbursement:

● Actual amounts spent or paid out of the budgeted amount.

● Obligations incurred (from step 3) are now being fulfilled.
● Basic journal entries are made:
○ Dr. Cash MDS Regular xx
○ Cr. Subsidy from Natl Gov't xx

6. Billings or Collection and Remittances (JE):

● On Account:

Dr. AR (Accounts Receivable) xx

Cr. Fees/Income xx
● Cash Collection:

Dr. Cash Collecting Officer xx

Cr. Accounts Receivable xx

● Remittance to Treasury:

Dr. Cash - Treasury Regular xx

Cr. Cash Collecting Officer xx

7. Closing Entries:

● Similar to basic accounting closing entries.

● Excess subsidy from the national government needs to be closed as income in the summary.