Government Accounting in the Philippines

• The government is the largest financial organization in the Philippines, with numerous departments and offices.
• It focuses on social welfare, national wealth development, state defense, justice, trade, and protection of rights.

Government Accounting

• It involves analyzing, recording, classifying, and communicating transactions related to government funds and assets.
• Aims to establish accountability over receipts, property, and expenditures.
• Generates information for reviewing government programs efficiently.
• Consolidates data for fiscal management with bookkeeping, classifying items, and analyzing financial reports.

Users of Government Accounting Information

• General public, governing bodies (President, Cabinet, COA, Legislative Body), and managers.
• Also intended for students of public finance and resource providers (donors, lenders, employees).
• Government accounting is a service activity.

Types of Governmental Units

• National Government Agencies (NGAs) include departments, bureaus, offices, boards, and state colleges.
• Local Government Units (LGUs) are political subdivisions with substantial control over local affairs.
• Government Owned or Controlled Corporations (GOCCs) are agencies organized by law for public needs.

Functions and Objectives of Government Accounting

• Provides financial information for effective public service decisions and management.
• Its objectives are to produce information on past and present conditions and provide guidance for the future.
• It also aims to control public officials' actions and report on the government's financial position.

Distinctions Between Government and Commercial Enterprises

• Ownership: Private enterprises are owned by a few, while the government represents the entire community.
• Purpose: Private enterprises primarily seek profits, while the government offers services at the lowest cost

Organizations

• Private enterprises have a succession from stockholders to a board of directors, while governmental responsibility lies in Congress.
• Financing: Private enterprises rely on voluntary contributions, while the government uses taxes.
• Income: Private enterprises generate profits, while the government levies taxes to cover its costs.

Differences in Accounting Objectives

• Commercial accounting aims to measure income and control resources.
• Governmental accounting focuses on controlling funds for proper use and providing data for management.

Accounting Basis

• Commercial accounting uses either cash or accrual methods.
• Governmental accounting uses a modified accrual basis.

Periodic Reports

• Commercial accounting prepares statements of financial position, cash flows, and notes.
• Government accounting follows PPSAS 1, including statements of changes in net assets, cash flows, budget comparison and an accountability report

Budget and Financial Accountability Reports (BFRS)

• Prescribed under COA-DBM Joint Circular # 2014-1.
• Includes statements of appropriations, budget utilization, aging of obligations, and monthly/quarterly reports.

Purposes served by BFRS

• Enables analysis of financial reports.
• Enable auditor to tag as 'Audited' the FSs/reports in the central database.
• Facilitate compliance monitoring, consolidates information, and provides training.

Control Mechanisms of Government Accounting

• Fund accounting, obligation accounting, and cash disbursement ceiling (CDC) accounting are used.
• One set of books is kept, including a Regular Agency (RA) Book and registries for budgetary accounts.

Accounts and Transactions

• Commercial accounting uses nominal and real accounts.
• Governmental accounting includes budgetary accounts (appropriation, allotments, and obligations).

Sources of accounting practices

• Commercial accounting is dictated by business and policies of management.
• Governmental accounting is governed by laws, rules, and regulations.

Salient Features of Government Accounting

• Limited resources and heavy reliance on taxes necessitate strict fiscal and accounting controls.

Control Mechanisms of Government Accounting (not adopted in commercial accounting)

• Fund accounting.
• Obligation accounting.
• Cash Disbursement Ceiling (CDC) Accounting.

Fund Accounting

• A fund is dedicated to specific activities under regulations and restrictions.
• General Funds for all government functions, and Special Funds for specified revenues.

Obligation Accounting

• It sets a ceiling on how much an agency can commit from its resources.

Cash Disbursement Ceiling Accounting

• Limits cash operations within appropriation releases.

Decision Making in Government

• Involves making economic decisions, accounting information is intended to be useful in making economic decisions and in making reasonable choices among alternative courses of action.
• It rests with the people.

Accounting Responsibility

• The head of each agency is primarily responsible for government funds and property.
• Accountable officers are responsible for safekeeping.

Delegation

• Heads must oversee accountable officers and can be held liable for losses.
• Supervisory work is shared among COA, DBM, and the Bureau of Treasury.

Roles

• COA is the external auditor, keeping general accounts and setting rules.
• DBM monitors budget performance.
• The Bureau of Treasury handles banking functions.

National Government Agencies (NGAs)

• Required to maintain accounting systems for their resources and operations.
• Agencies maintain books and registries reconciled with the BTr and COA records

Accountability vs. Responsibility vs. Authority

• Accountability: answering for assigned responsibilities.
• Responsibility: addressing concerns within one's obligations.
• Authority: the right to exercise power.

Government Accountability and Management (GAM) Section 3

• Outlines responsibility, accountability, and liability over government funds and property.

Responsibility

• Government resources must be managed and safeguarded according to laws.
• Fiscal responsibility should be shared.

Accountability over Funds and Property

• Officers whose duties involve government funds or property must be accountable and bonded.
• Transfers of funds require authorization.

Liability

• Misuse of funds results in personal liability.
• Officers are liable for losses from unlawful deposits or negligence

Relief from Liability

• Notified superiors in writing about the illegality.
• Provide notification of a cash shortage.

Additional points for the State

• Compliance with laws and regulations, safeguarding resources, and meeting goals.

Generally Accepted Accounting Principles (GAAP)

• Guide accountants and ensure uniformity and comparability.
• Primary sources: COA pronouncements and provisions of law like Sec. 112 of PD 1445.

Basic Government Accounting Principles

• Each entity shall recognize and present its financial transactions and operations conformably to the following:
  • Generally accepted government accounting principles in accordance with the PPSAS and pertinent laws, rules and regulations;
  • Accrual basis of accounting in accordance with the PPSAS;
  • Budget basis for presentation of budget information in the financial statements (FSs) in accordance with PPSAS 24;
  • RCA prescribed by COA;
  • Double entry bookkeeping;
  • Financial statements based on accounting and budgetary records; and
  • Fund cluster accounting.
• The books of accounts are maintained by fund cluster (i.e., according to the types of funds being accounted for).

Assertions

• Management representations in transactions and financial statements.
• When expenditures, disbursements, it is claimed that the amount has been disbursed.

Resource Assertion

• Resources are duly safeguarded.
• The auditee must follow assertions of existence, completeness, rights/obligations, valuation, and disclosure.
• The government must measure entity performance through economy, efficiency, and effectiveness.

PART II: Government Accounting Manual (GAM)

• GAM focuses on reforms, international standards (IPSAS), and technology updates.
• GAM is prescribed by COA and incorporates Philippine Public Sector Accounting Standards (PPSAS).

Adoption

• It presents accounting policies aligned with PPSAS, laws, and regulations, the accounting procedures, books, registries, records, forms, reports, financial statements; and illustrative accounting entries.

Manual goal

• To update accounting standards and coding structures.
• To update accounting books, registries, records, forms, reports and financial statemen

Features

• The modified accrual basis is used.
• One Fund Concept requires separate fund accounting with specific requirements.

Books and Registries

• Journal:
  • General Journal (GAM Appendix 1).
  • Cash Receipts Journal (GAM Appendix 2).
  • Cash Disbursements Journal (GAM Appendix 3).
  • Check Disbursements Journal (GAM Appendix 4).
• Ledger
  • General Ledgers (GAM Appendix 5).
  • Subsidiary Ledgers (GAM Appendix 6).
• Registries
  • Registries of Revenue and Other Receipts (GAM Appendices 7, 7A, 7B, 7C and 7D).
  • Registry of Appropriations and Allotments (GAM Appendix 8).
  • Registries of Allotments, Obligations and Disbursements – for PS, MOOE, CO and FE (GAM Appendices 9A, 9B, 9C and 9D).
  • Registries of Budget, Utilization and Disbursements (GAM Appendices 10A, 10B, 10C and 10D).

Financial Statements

• AFRS and BFRS

The COA

• Prescribed the adoption of 25 Philippine Public Sector Accounting Standards (PPSASS) based on the International Public Sector Accounting Standards (IPSASs.).
• Two-Money Column Trial Balance: two - money column trial balance showing the account balances shall be used.
• Modified obligation accounting procedures and separates registries to control allotments.
• Used allotment class, maintained for continuing appropriations, unreleased, unobligated allotments.

Notice of Cash Allocation (NCA)

• Agency receipts recorded as debit "Cash- Modified Disbursement System (MDS) Regular," credit "Subsidy from National Government."

Expenses

• Separate classification of financial expenses from Maintenance and Other Operating Expenses (MOOE).

Perpetual Inventory

• Recorded for supplies and materials inventories; regular purchases thru inventory and accounted for as per the inventory account.

Valuation

• Cost of ending inventory is determined using the moving average method.
• Must maintain equipment Cards for check and balance between properties and accountability.

Construction of Assets

• Applying the Construction Period Theory for costing purposes.
• Capitalizing related expenses and deducting liquidated damages.

Public Infrastructure Registry

• For agencies investing to public infrastructure constructions or reforestations, recognition of related assets.

Depreciation method

• Straight-line depreciation starts the month after purchasing equipment, with a 5% residual value

Reclassification

• Serviceable assets reclassified to "Other Assets" if no longer used.

Doubtful Accounts

• An Allowance for Doubtful Accounts shall be set up for estimated uncollectible trade receivables to allow for their fair valuation.

Contingent Accounts

• Eliminated and replaced with appropriate accounts.

Recognition

• Liability upon acceptance of goods/services.

Accruals

• Interest income/expense accrued when appropriate.

Records

• Accurate records for borrowing and loan liabilities.

Journal Entries

• Elimination of negative journal entries.

Petty Cash system

• Petty Cash Fund operated under the imprest system.

Foreign Currency

• It is calculated using BSP rates, and must be recognized, recorded and disclosed appropriately.