Government Accounting Manual (GAM) For National Government Agencies Volume I - PDF

 ACKNOWLEDGEMENT The Government Accounting Manual (GAM) for National Government Agencies (NGAs) is a product of hard work and selfless commitment of the working group composed of the heads of the services and selected personnel of the Government Accountancy Sector (...

 ACKNOWLEDGEMENT The Government Accounting Manual (GAM) for National Government Agencies (NGAs) is a product of hard work and selfless commitment of the working group composed of the heads of the services and selected personnel of the Government Accountancy Sector (GAS), Commission on Audit (COA) with the proficient guidance and direction of Assistant Commissioner Lourdes M. Castillo, Director Usmin P. Diamel, Director Luzvi Pangan Chatto, Director Maria Fe A. Dinapo, as well as Director Sheila U. Villa and Director Marlon M. Marquina. The review and evaluation of the various policies in this Manual by the National Government Sector (NGS); the Corporate Government Sector (CGS); the Planning, Finance and Management Sector (PFMS); and the Professional and Institutional Development Sector (PIDS) of this Commission helped in identifying issues and concerns that need to be addressed in the GAM. The gathering of valuable inputs through the conduct of two (2) batches of Focus Group Discussions (FGDs) was successfully done with the unwavering support of the Assistant Commissioners, Directors, selected auditors and personnel of the NGS, PFMS and PIDS under the able leadership of Assistant Commissioners Susan P. Garcia, Carmela S. Perez and Luz Loreto-Tolentino, respectively. The FGDs were led by Assistant Commissioner Lourdes M. Castillio, GAS, and panelists from the GAS, namely, Director Usmin P. Diamel, Director Luzvi Pangan Chatto, Director Maria Fe A. Dinapo and Director Marlon R. Marquina, and from the NGS, namely, Director Marietta M. Lorenzo and Director Adelina Concepcion L. Ancajas. The FGDs were participated in by the following COA and various government agency personnel, who unselfishly shared their meaningful recommendations on how to make the Manual more useful to its intended users: Commission on Audit, Government Accountancy Sector: Elena B. Monteza, Emelita V. Cayetano, Annabelle A. Puserio, Romeo C. Cruz, Annabella P. Gabiran, Carmen Z. Zafe, Agustina Q. Baseo, Susana M. De Guzman, Avelina G. Marquez, Jorgen Z. Fulleros, Juanita C. Fuggan, Vanessa Donnabel F. Manito, Cristina C. Gungon, Pretizel Ivy T. Arteche, Mairyl Ann R. Merced, Bernadeth P. Virrey and Berlin M. Quevedo; Planning, Finance and Management Sector: Rebecca C. Dacanay, Zenaida A. Botona, Sofronio B. Bustamante, Imelda P. Angeles and Beverly L. Letada; and National Government Sector: Director Aurora A. Ebora, OIC-Director III Maribeth F. De Jesus, Karlo P. Almonidovar, Marieta V. Andoy, Flordeliza A. Ares, Gloria M. Bacani, Flovitas U. Felipe, Jesusa R. Gauang, Myrna D. Monzon, Normita N. Narvaez, Rosemarie A. Valenzuela, Teresa C. Atis, Remedios F. Pacheco, Joycelyn R. Ramos, Cecilia G. Rañeses, Melinda R. Barcial, Gloria R. Baylon, Luz R. Cadano, Myrna B. Cells, Edna L. De Leon, Ma. Carmen C. De los Santos, Alma B. Enriquez, Perla D. Libunao, Marilyn B. Miran, Felicidad G. Rellen, Rebecca B. Sabuelba, Caridad A. Sarmiento, Reynalda M. Sorra, Nenita V. Talion, Melinda S. Torio, Ma. Luisa R. Villanueva and Victoria R. Yumang.  National Government Agencies, Bureau of Internal Revenue: Assistant Commissioner Zenaida B. Chang, Sittie Alyssah A. Banisil, Edna L. Bautista, Teresa A. Cancino, Ma. Teresa C. Gonzales, Teresita G. Marquinez, Joyce A. Nipal, Maria Victoria B. Villena and Roy B. Villena; Bureau of the Treasury: Carol D. Jorge, Marites B. Masarap, Salvacion C. Rios, Emilia T. Tuquero, Avelina H. Zumarraga, Gloria M. Antazo, Marcela J. Dalangin, Agnes D. Lacuata, Rowena R. Gamba and Reynaldo Z. Delos Santos; Civil Service Commission: Rodel R. Timbol, Julius B. Remudaro, and Escarlet G. Conde; Commission on Elections: Danilo E. Lustre and Minerva N. Madjus; Department of Agriculture: Edna S. Camacho, Marcela H. Nepomuceno, Corazon A. Saldivar and Nelson E. Vagilidad; Department of Agrarian Reform: Rowena U. Agbayani and Ma. Lourdes G. Ranara; Department of Education: Neliza G. Advincula and Presentacion A. Salandanan; Department of Environment and Natural Resources: Marivic B. Hidalgo, Renato E. Ho and Diña M. Nillosan; Department of Finance: Josef G. Espiritu; Department of Foreign Affairs: Fernette A. Ubanos, Danilo G. Cabanayan and Maria Celesty D. Cornejo; Department of Health: Racquel P. Alvendia and Agnes D. Marfori; Department of Health-East Avenue Medical Center: Laiza Marie V. Annang and Marietta M. Cruz; Department of the Interior and Local Government: Estela R. Basañes, Sharry I. Sinon, Rina B. Capistrano and Aira Kathrina C. Perez; Department of National Defense-Proper: Rolando J. Romero; Department of Justice: Vicente B. Mirano III and Jelly B. Tugbo; Department of Public Works and Highways: Marilou D. Alfanta, Mary Antoinette Z. Puno and Jessica J. Catibayan; Department of Science and Technology: Rosario D. Balde, Van Rijn A. Espinoza, Adora L. Gabiana, Luciana C. Panaligan and Rosalia F. Sosa; Department of Social Welfare and Development: Meriel P. Castillo, Joan V. Biñas, Grace Ann S. Nisperos and Angelina E. Racho; Department of Transportation and Communications: Edna C. Tapar, Evangeline T. Fernandez and Elvira F. Villar; National Historical Commission of the Philippines: Pricila M. Manalo; National Museum: Consuelo M. Bernardo; Public-Private Partnership Center of the Philippines: Heidee-May H. Aquitania; Supreme Court: Violeta T. Alarcon, Moises B. Figueroa and Nelson C. Martin; and University of the Philippines- Diliman: Alexandria P. Pineda and Karen Krista F. Villanueva. The dream of producing this Manual as guide in the implementation of the Philippine Public Sector Accounting Standards was made a reality with the financial support from the Public Financial Management Committee through the Accounting and Auditing Reform Project Implementation Unit, and the Kreditanstalt für Wiederaufbau (KFW). The release of the funds was facilitated by the International Finance Group of the Department of Finance and the Department of Budget and Management. The printing of this Manual was carefully done by the Printing and Publication Services, Policy Research and Institutional Development Office, PIDS, this Commission.  More importantly, the painstaking efforts of the working group became more invaluable because of the support and guidance of the top officials of the Commission: the Honorable Members of the Commission Proper composed of Chairperson Michael G. Aguinaldo, Commissioner Heidi L. Mendoza, and Commissioner Jose A. Fabia. Finally, the Government Accountancy Sector is very grateful to all the aforementioned individuals and entities for all their priceless contributions in this Manual. Name Position Office of the Assistant Commissioner Lourdes M. Castillo Assistant Commissioner Editha M. Ramirez State Auditor V Luisa S. Nadonga Supervising Administrative Officer Benjie D. Baturi Administrative Aide VI Maricel S. Ampoc Administrative Aide VI Magdalena M. Gaviola Administrative Aide IV Government Accountancy Office Office of the Director Usmin P. Diamel Director IV Maria Fe A. Dinapo Director III Ma. Belen L. Estuaria State Auditor III Mary Jane S. Liberato Administrative Aide VI Maria C. Lainez Administrative Aide V Rufa L. Gunabe Administrative Aide V Teddy N. Alejandro Administrative Aide IV Local Government Accounts Services Emelita V. Cayetano State Auditor V Avelina G. Marquez State Auditor IV Aida A. Donasco State Auditor III Joven L. Recto State Auditor III Maribel G. Cablayan State Auditor III Elizabeth D. Ducay State Auditor II General Accounts Services-National I Thelma F. Panganiban State Auditor V Lorelie L. Datu State Auditor IV Josefino O. Lainez State Auditor III Susan C. Vega State Auditor III Carol F. Manzanillo Administrative Officer III General Accounts Services-National II Marilyn C. Bibat State Auditor V Narcisa S. dela Rosa State Auditor III Ma. Corazon D. Eguia State Auditor II Jane L. Maramag State Auditor II Rodel Joseph Y. Navarro State Auditing Examiner II Corporate Government Accounts Services Agustina Q. Baseo State Auditor IV  Name Position Vanessa Donnabel F. Manito State Auditor III Zenaida P. Balmes State Auditor III Princess M. Buan State Auditor I Elizabeth P. Quiban State Auditor I Public Debt and Miscellaneous Accounts Services Anicia H. Guillermo State Auditor V Elmer M. Grande State Auditor IV Ma. Lourdes D. Marayan State Auditor III Visitacion T. Corpuz State Auditor II Jose Jayson L. Medel State Auditor I Accounting Systems Development and Other Services Office Office of the Director Luzvi Pangan Chatto Director IV Elena B. Monteza State Auditor V Editha C. Ramirez Administrative Assistant VI Lailah D. Chua Administrative Aide VI Marissa D. Labajan Administrative Aide IV Roberto L. Palita, Jr. Administrative Aide IV Accounting Systems Development and Other Services-National Annabelle A. Puserio State Auditor V Cristina C. Gungon State Auditor III Pretizel Ivy T. Arteche State Auditor I Berlin M. Quevedo Administrative Aide VI Accounting Systems Development and Other Services-Corporate Annabella P. Gabiran State Auditor IV Juanita C. Fuggan State Auditor III Mairyl Ann R. Merced State Auditor I Bernadette P. Virrey Administrative Officer III Accounting Systems Development and Other Services-Local Carmen Z. Zafe State Auditor IV Susana M. de Guzman State Auditor IV Hannah Grace P. Valente State Auditing Examiner II Mhay D. Litada Administrative Aide IV Technical Assistance and Help Desk Services Romeo C. Cruz State Auditor V Jorgen Z. Fulleros State Auditor IV Michelle M. Gagarra Administrative Officer III Gabriel B. Mercado Computer Maintenance Technologist I Lara Jane M. Dela Torre Administrative Aide IV  GOVERNMENT ACCOUNTING MANUAL (GAM) For National Government Agencies Volume I Accounting Policies, Guidelines and Procedures and Illustrative Accounting Entries Table of Contents Chapter No. Title Page No. 1 Introduction 1 2 General Provisions, Basic Standards and Policies 2 3 Budget Execution, Monitoring and Reporting 15 4 Responsibility Accounting 30 5 Revenue and Other Receipts 33 6 Disbursements 61 7 Financial Instruments 114 8 Inventories 130 9 Investment Property 145 10 Property, Plant and Equipment 164 11 Agriculture 213 12 Intangible Assets 227 13 Leases 236 14 Service Concession Arrangements: Grantor 251 15 Interests in Joint Venture 258 16 The Effects of Changes in Foreign Exchange Rates 265 17 Borrowing Costs 269 18 Provisions, Contingent Liabilities and Contingent Assets 274 19 Financial Reporting 280 20 Consolidated and Separate Financial Statements 310 21 Bank Reconciliation 316 22 Illustrative Accounting Entries 326  GOVERNMENT ACCOUNTING MANUAL (GAM) For National Government Agencies Volume I Accounting Policies, Guidelines and Procedures and Illustrative Accounting Entries Table of Contents Annex No. Title Page No. A Statement of Financial Position 327 A-1 Statement of Financial Position-Detailed 328 B Statement of Financial Performance 343 B-1 Statement of Financial Performance-Detailed 344 C Statement of Changes in Net Assets/Equity 352 D Statement of Cash Flows 353 D-1 Statement of Cash Flows-Detailed 354 E Statement of Comparison of Budget and Actual Amounts 360 F Sample Notes to Financial Statements 361 G Statement of Management Responsibility for Financial Statements 405 Illustrative Accounting Entries: H Regular Agency Fund 406 I Foreign Assisted Projects Fund 430 J Special Account-Locally Funded/Domestic Grants Fund 443 K Special Account-Foreign Assisted/Foreign Grants Fund 447 L Retained Income 450 M Trust Receipts-IATF Remitted to Bureau of the Treasury 452 N Trust Receipts-Deposited with AGDB 461 O Trust Receipts-Other than IATF 462 P Composition of Fund Clusters 464 Q Acronyms 479  Chapter 1 INTRODUCTION Recent developments brought about by the Philippine Public Financial Management Reforms and significant changes in the field of accounting prompted the harmonization of the existing accounting standards with the international accounting standards. This Commission revised the New Government Accounting System (NGAS) Manual prescribed under Commission on Audit (COA) Circular No. 2002-002 dated June 18, 2002 to make it responsive to dynamic changes and modern technology. Sec. 1. Legal Basis. The Government Accounting Manual (GAM) is prescribed by COA pursuant to Article IX-D, Section 2 par. (2) of the 1987 Constitution of the Republic of the Philippines which provides that: “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". (Underscoring supplied) Sec. 2. Coverage. This Manual presents the basic accounting policies and principles in accordance with the Philippine Public Sector Accounting Standards (PPSAS) adopted thru COA Resolution No. 2014-003 dated January 24, 2014 and other pertinent laws, rules and regulations. It includes the Revised Chart of Accounts (RCA) prescribed under COA Circular No. 2013-002 dated January 30, 2013, as amended; the accounting procedures, books, registries, records, forms, reports, and financial statements; and illustrative accounting entries. It shall be used by all National Government Agencies (NGAs) in the: a. 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; and b. reporting of budget, revenue and expenditure in accordance with laws, rules and regulations. Sec. 3. Objective of the Manual. The Manual 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. 1  Chapter 2 GENERAL PROVISIONS, BASIC STANDARDS AND POLICIES Sec. 1. Scope. This chapter covers the general provisions from existing laws, rules and regulations; and the basic standards/fundamental accounting principles for financial reporting by national government agencies. Sec. 2. Definition of Terms. For the purpose of this Manual, the terms used as stated below shall be construed to mean as follows: a. Accrual basis – means a basis of accounting under which transactions and other events are recognized when they occur (and not only when cash or its equivalent is received or paid). Therefore, the transactions and events are recognized in the accounting records and recognized in the financial statements of the periods to which they relate. The elements recognized under accrual accounting are assets, liabilities, net assets/equity, revenue, and expenses. b. Assets – are resources controlled by an entity as a result of past events, and from which future economic benefits or service potential are expected to flow to the entity. c. Contributions from owners – means future economic benefits or service potential that have been contributed to the entity by parties external to the entity, other than those that result in liabilities of the entity, that establish a financial interest in the net assets/equity of the entity, which: 1. conveys entitlement both to (i) distributions of future economic benefits or service potential by the entity during its life, such distributions being at the discretion of the owners or their representatives; and to (ii) distributions of any excess of assets over liabilities in the event of the entity being wound up; and/or 2. can be sold, exchanged, transferred, or redeemed. d. Distributions to owners – means future economic benefits or service potential distributed by the entity to all or some of its owners, either as a return on investment or as a return of investment. e. Entity – refers to a government agency, department or operating/field unit. It may be referred to in this GAM as an agency. f. Expenses – are decreases in economic benefits or service potential during the reporting period in the form of outflows or consumption of assets or incurrence of liabilities that result in decreases in net assets/equity, other than those relating to distributions to owners. g. 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. (Sec. 109, Presidential Decree (P.D.) No. 1445) h. Government Budget – is the financial plan of a government for a given period, usually for a fiscal year, which shows what its resources are, and how they will be generated 2  and used over the fiscal period. The budget is the government's key instrument for promoting its socio-economic objectives. The government budget also refers to the income, expenditures and sources of borrowings of the National Government (NG) that are used to achieve national objectives, strategies and programs. i. Liabilities – are firm obligations of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits or service potential. j. Net assets/equity – is the residual interest in the assets of the entity after deducting all its liabilities. k. Revenue – is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net assets/equity, other than increases relating to contributions from owners. l. Revenue funds – comprise all funds derived from the income of any agency of the government and available for appropriation or expenditure in accordance with law. (Section 3, P.D. No. 1445) Sec. 3. Responsibility, Accountability and Liability over Government Funds and Property a. Responsibility over Government Funds and Property 1. It is the declared policy of the State that all resources of the government shall be managed, expended or utilized in accordance with laws and regulations, and safeguarded against loss or wastage through illegal or improper disposition, with a view to ensuring efficiency, economy and effectiveness in the operations of government. The responsibility to take care that such policy is faithfully adhered to rests directly with the chief or head of the government agency concerned. (Sec. 2, P.D. No. 1445) 2. Fiscal responsibility shall, to the greatest extent, be shared by all those exercising authority over the financial affairs, transactions, and operations of the government agency. (Sec. 4(4), P.D. No. 1445) 3. The head of any agency of the government is immediately and primarily responsible for all government funds and property pertaining to his agency. Persons entrusted with the possession or custody of the funds or property under the agency head shall be immediately responsible to him, without prejudice to the liability of either party to the government. (Sec. 102, P.D. No. 1445) b. Accountability over Government Funds and Property 1. Every officer of any government agency whose duties permit or require the possession or custody of government funds or property shall be accountable therefor and for the safekeeping thereof in conformity with law. Every AO shall be properly bonded in accordance with law. (Sec. 101, P.D. No. 1445; Section 50, Chapter 9, Subtitle B, Book V, Executive Order (E.O.) No. 292) 2. Transfer of government funds from one officer to another shall, except as allowed by law or regulation, be made only upon prior direction or authorization of the Commission or its representative. (Sec. 75, P.D. No. 1445) 3  3. When government funds or property are transferred from one AO to another, or from an outgoing officer to his successor, it shall be done upon properly itemized invoice and receipt which shall invariably support the clearance to be issued to the relieved or outgoing officer, subject to regulations of the Commission. (Sec. 77, P.D. No. 1445) c. Liability over Government Funds and Property 1. Expenditures of government funds or uses of government property in violation of law or regulations shall be a personal liability of the official or employee found to be directly responsible therefor. (Sec. 103, P.D. No. 1445) 2. Every officer accountable for government funds shall be liable for all losses resulting from the unlawful deposit, use, or application thereof and for all losses attributable to negligence in the keeping of the funds. (Sec. 105(2), P.D. No. 1445) 3. No AO shall be relieved from liability by reason of his having acted under the direction of a superior officer in paying out, applying, or disposing of the funds or property with which he is chargeable, unless prior to that act, he notified the superior officer in writing of the illegality of the payment, application, or disposition. The officer directing any illegal payment or disposition of the funds or property shall be primarily liable for the loss, while the AO who fails to serve the required notice shall be secondarily liable. (Sec. 106, P.D. No. 1445) 4. When a loss of government funds or property occurs while they are in transit or the loss is caused by fire, theft, or other casualty or force majeure, the officer accountable therefor or having custody thereof shall immediately notify the Commission or the auditor concerned and, within 30 days or such longer period as the Commission or auditor may in the particular case allow, shall present his application for relief, with the available supporting evidence. Whenever warranted by the evidence, credit for the loss shall be allowed. An officer who fails to comply with this requirement shall not be relieved of liability or allowed credit for any loss in the settlement of his accounts. (Sec. 73, P.D. No. 1445) Sec. 4. Fundamental Principles for Revenue. All revenues accruing to the NGAs shall be governed by the following fundamental principles: a. Unless otherwise specifically provided by law, all revenues accruing to an entity by virtue of the provisions of existing law, orders and regulations shall be deposited/remitted in the National Treasury (NT) or in any duly authorized government depository, and shall accrue to the General Fund (GF) of the NG. (Sec. 65(1), P.D. No. 1445) b. Except as may otherwise be specifically provided by law or competent authority, all moneys and property officially received by a public officer in any capacity or upon any occasion must be accounted for as government funds and government property. (Sec. 42, Chapter 7, Title I(B), Book V, E.O. No. 292) c. Amounts received in trust and from business-type activities of government may be separately recorded and disbursed in accordance with such rules and regulations as may be determined by a Permanent Committee composed of the Secretary of Finance as Chairman, and the Secretary of Budget and Management and the Chairman, COA, as members. (Sec. 65(2), P.D. No. 1445) 4  d. Receipts shall be recorded as revenue of Special, Fiduciary or Trust Funds or Funds other than the GF, only when authorized by law as implemented by rules and regulations issued by the Permanent Committee. (Sec. 66, P.D. No. 1445) e. No payment of any nature shall be received by a collecting officer without immediately issuing an official receipt in acknowledgement thereof. The receipt may be in the form of postage, internal revenue or documentary stamps and the like, officially numbered receipts, subject to proper custody, accountability, and audit. (Sec. 68(1), P.D. No. 1445) f. Where mechanical devices (e.g. electronic official receipt) are used to acknowledge cash receipts, the COA may approve, upon request, exemption from the use of accountable forms. (Sec. 68 (2), P.D. No. 1445) g. At no instance shall temporary receipts be issued to acknowledge the receipt of public funds. (Sec. 72, GAAM Volume I) h. Pre-numbered ORs shall be issued in strict numerical sequence. All copies of each receipt shall be exact copies or carbon reproduction in all respects of the original. (Sec. 73, GAAM Volume I) i. An officer charged with the collection of revenue or the receiving of moneys payable to the government shall accept payment for taxes, dues or other indebtedness to the government in the form of checks issued in payment of government obligations, upon proper endorsement and identification of the payee or endorsee. Checks drawn in favor of the government in payment of any such indebtedness shall likewise be accepted by the officer concerned. At no instance should money in the hands of the CO be utilized for the purpose of cashing private checks. (Sec. 67(1) and (3), P.D. No. 1445) j. Under such rules and regulations as the COA and the Department of Finance (DOF) may prescribe, the Treasurer of the Philippines and all AGDB shall acknowledge receipt of all funds received by them, the acknowledgement bearing the date of actual remittance or deposit and indicating from whom and on what account it was received. (Sec. 70, P.D. No. 1445) Sec. 5. Fundamental Principles for Disbursement of Public Funds. Section 4 of P.D. No. 1445, the Government Auditing Code of the Philippines, provides that all financial transactions and operations of any government entity shall be governed by the following fundamental principles: a. No money shall be paid out of any public treasury or depository except in pursuance of an appropriation law or other specific statutory authority. b. Government funds or property shall be spent or used solely for public purposes. c. Trust funds shall be available and may be spent only for the specific purpose for which the trust was created or the funds received. d. Fiscal responsibility shall, to the greatest extent, be shared by all those exercising authority over the financial affairs, transactions, and operations of the government agency. 5  e. Disbursement or disposition of government funds or property shall invariably bear the approval of the proper officials. f. Claims against government funds shall be supported with complete documentation. g. All laws and regulations applicable to financial transactions shall be faithfully adhered to. h. Generally accepted principles and practices of accounting as well as of sound management and fiscal administration shall be observed, provided that they do not contravene existing laws and regulations. Sec. 6. Basic Government Accounting and Budget Reporting Principles. Each entity shall recognize and present its financial transactions and operations conformably to the following: a. generally accepted government accounting principles in accordance with the PPSAS and pertinent laws, rules and regulations; b. accrual basis of accounting in accordance with the PPSAS; c. budget basis for presentation of budget information in the financial statements (FSs) in accordance with PPSAS 24; d. RCA prescribed by COA; e. double entry bookkeeping; f. financial statements based on accounting and budgetary records; and g. fund cluster accounting. Sec. 7. Keeping of the General Accounts. The COA shall keep the general accounts of the Government and, for such period as may be provided by law, preserve the vouchers and other supporting papers pertaining thereto, pursuant to Section 2, par. (1), Article IX-D of the 1987 Philippine Constitution. Sec. 8. Financial Reporting System for the National Government. The financial reporting system of the Philippine government consists of accounting system on accrual basis and budget reporting system on budget basis under the statutory responsibility of the NGAs, Bureau of the Treasury (BTr), Department of Budget and Management (DBM), and the COA, as follows: a. Each entity of the National Government (NG) maintains complete set of accounting books by fund cluster which is reconciled with the records of cash transactions maintained by the BTr. b. The BTr accounts for the cash, public debt and related transactions of the NG. c. Each entity maintains budget registries which are reconciled with the budget records maintained by the DBM and the Government Accountancy Sector (GAS), COA. d. The COA, through the GAS: 1. maintains budget records showing the overall approved budget of the NG and its execution/implementation; 6  2. consolidates the FSs and budget accountability reports of all NGAs and the BTr with COA’s records to come up with an Annual Financial Report (AFR) for the NG as required in Section 4, Article IX-D of the 1987 Philippine Constitution; and 3. prepares other financial reports required by law for submission to oversight agencies. Sec. 9. Objectives of General Purpose Financial Statements. The objectives of general purpose financial statements (GPFSs) are to provide information about the financial position, financial performance, and cash flows of an entity that is useful to a wide range of users in making and evaluating decisions about the allocation of resources. Specifically, the objectives of general purpose financial reporting in the public sector are to provide information useful for decision-making, and to demonstrate the accountability of the entity for the resources entrusted to it. Sec. 10. Responsibility for Financial Statements. The responsibility for the preparation of the FSs rests with the following: a. for individual entity/department FSs – the head of the entity/department central office (COf) or regional office (RO) or operating unit (OU) or his/her authorized representative jointly with the head of the finance/accounting division/unit; and b. for department/entity FSs as a single entity – the head of the entity/department COf jointly with the head of the finance unit. Sec. 11. Components of General Purpose Financial Statements. The complete set of GPFSs consists of: a. Statement of Financial Position (Annex A); b. Statement of Financial Performance (Annex B); c. Statement of Changes in Net Assets/Equity (Annex C); d. Statement of Cash Flows (Annex D); e. Statement of Comparison of Budget and Actual Amounts (Annex E); and f. Notes to the Financial Statements, comprising a summary of significant accounting policies and other explanatory notes. (Annex F) Sec. 12. Books of Accounts and Registries. The books of accounts and registries of the NG entities consist of: a. Journals 1. General Journal (Appendix 1) 2. Cash Receipts Journal (Appendix 2) 3. Cash Disbursements Journal (Appendix 3) 4. Check Disbursements Journal (Appendix 4) b. Ledgers 1. General Ledgers (Appendix 5) 2. Subsidiary Ledgers (Appendix 6) 7  c. Registries 1. Registries of Revenue and Other Receipts (Appendices 7, 7A, 7B, 7C and 7D) 2. Registry of Appropriations and Allotments (Appendix 8) 3. Registries of Allotments, Obligations and Disbursements (Appendices 9A, 9B, 9C and 9D) 4. Registries of Budget, Utilization and Disbursements (Appendices 10A, 10B, 10C and 10D) Sec. 13. Fund Accounting. The books of accounts shall be maintained by fund cluster as follows: Code Description 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 The composition of fund clusters is enumerated in Annex P. Sec. 14. Components of Budget and Financial Accountability Reports. The budget reports consist of the following Budget and Financial Accountability Reports (COA-DBM-DOF Joint Circular No. 2013-1, as amended by COA and DBM Joint Circular No. 2014-1 dated July 2, 2014): a. Quarterly Physical Report of Operation (QPRO) – BAR No. 1 b. Statement of Appropriations, Allotments, Obligations, Disbursements and Balances (SAAODB) – FAR No. 1 c. Summary of Appropriations, Allotments, Obligations, Disbursements and Balances by Object of Expenditures (SAAODBOE) – FAR No. 1-A d. List of Allotments and Sub-Allotments (LASA) – FAR No. 1-B e. Statement of Approved Budget, Utilizations, Disbursements and Balances (SABUDB) – FAR No. 2 (for Off-Budget Fund) f. Summary of Approved Budget, Utilizations, Disbursements and Balances by Object of Expenditures (SABUDBOE) – FAR No. 2-A (for Off-Budget Fund) g. Aging of Due and Demandable Obligations (ADDO) – FAR No. 3 h. Monthly Report of Disbursements (MRD) – FAR No. 4 i. Quarterly Report of Revenue and Other Receipts (QRROR) – FAR No. 5 Sec. 15. Fair Presentation. The FSs shall present fairly the financial position, financial performance and cash flows of an entity. Fair presentation requires the faithful representation of the effects of transactions, other events, and conditions in accordance with the definitions and 8 recognition criteria for assets, liabilities, revenue, and expenses set out in PPSAS. The application of PPSAS, with appropriate disclosures, if necessary, would result in fair presentation of the FS. Sec. 16. Compliance with PPSASs. An entity whose financial statements comply with PPSASs shall make an explicit and unreserved statement of such compliance in the notes. Financial statements shall not be described as complying with PPSASs unless they comply with all the requirements of PPSASs. Inappropriate accounting policies that do not comply with PPSAS are not rectified either by disclosure of the accounting policies used, or by notes or explanatory material. Sec. 17. Departure from PPSAS. In the event that Management strongly believes that compliance with the requirement of PPSAS would result in misleading presentation that it would contradict the objective of the FSs set forth in PPSAS, the entity may depart from that requirement if the relevant regulatory framework allows, or otherwise does not prohibit, such a departure. Sec. 18. Going Concern. The FSs shall be prepared on a going concern basis unless there is an intention to discontinue the entity operation, or if there is no realistic alternative but to do so. Sec. 19. Consistency of Presentation. The presentation and classification of items in the FSs shall be retained from one period to the next unless laws, rules and regulations, and PPSAS require a change in presentation. Sec. 20. Materiality and Aggregation. Each material class of similar items shall be presented separately in the financial statements. Items of a dissimilar nature or function shall be presented separately unless they are immaterial. If a line item is not material, it is aggregated with other items either on the face of FSs or in the Notes to the FSs. A specific disclosure requirement in a PPSAS need not be satisfied if the information is not material. Sec. 21. Offsetting. Assets and liabilities, and revenue and expenses shall not be allowed to offset unless required or permitted by a PPSAS except when offsetting reflects the substance of the transaction or other event. Sec. 22. Comparative Information. Comparative information shall be disclosed with respect to the previous period for all amounts reported in the FSs. Comparative information shall be included for narrative and descriptive information when it is relevant to an understanding of the current period’s FSs. Sec. 23. Structure and Content. The FSs and each component shall be identified clearly and distinguished from other information in the same published document. Sec. 24. Statement of Financial Position. An entity shall present current and non- current assets, as well as current and non-current liabilities, as separate classifications on the face of the Statement of Financial Position (SFP). Sec. 25. Statement of Financial Performance. The Statement of Financial Performance (SFPer) shall include line items that present the revenue, expenses and net surplus or deficit for the period. 9  Sec. 26. Statement of Changes in Net Assets/Equity. An entity shall present in the Statement of Changes in Net Assets/Equity (SCNA/E) the following: a. Net Income or Deficit for the period; b. Each item of revenue and expenses for the period that, as required by Standards, is recognized directly in net assets/equity, and the total of these items; c. Total revenue and expenses for the period; and d. For each component of net assets/equity separately disclosed, the effects of changes in accounting policies and corrections of errors recognized in accordance with PPSAS 3-Accounting Policies, Changes in Accounting Estimates and Errors. Sec. 27. Statement of Cash Flows. The Statement of Cash Flows (SCF) provides information to users of FSs a basis to assess the ability of the entity to generate cash and cash equivalents and to determine the entity’s utilization of funds. This also provides information on how the entity generates income authorized to be used in their operation and its utilization. Sec. 28. Statement of Comparison of Budget and Actual Amounts. A comparison of budget and actual amounts will enhance the transparency of financial reporting in government. This shall be presented by government agencies as a separate additional financial statement referred in this Manual as the Statement of Comparison of Budget and Actual Amounts (SCBAA). Sec. 29. Notes to Financial Statements. The Notes to FSs contain information in addition to that presented in the SFP, SFPer, SCNA/E, SCF and SCBAA. Notes provide narrative descriptions or disaggregation of items disclosed in those FSs and information about items that do not qualify for recognition in those statements. Sec. 30. Qualitative Characteristics of Financial Reporting. An entity shall present information including accounting policies in a manner that meets a number of qualitative characteristics such as understandability, relevance, materiality, reliability and comparability. These qualitative characteristics are the attributes that make the information provided in the FSs useful to users. Sec. 31. Key Features of Assets. The key features of an asset are: a. the benefits must be controlled by the entity; b. the benefits must have arisen from a past event; and c. future economic benefits or service potential must be expected to flow to the entity. The following are indicators of control of the benefits by the entity: a. the ability of an entity to benefit from the asset and to deny or regulate the access of others to that benefit. b. an entity can, depending on the nature of the asset, exchange it, use it to provide goods or services, exact a price for others’ use of it, use it to settle liabilities, hold it, or perhaps even distribute it to owners. 10  c. possession or ownership of an object or right would normally be synonymous with control over the future economic benefits embodied in the right or object. However, there are instances when an entity may possess an object or right but not expect to enjoy the benefits embodied in it, e.g. under a finance lease agreement, control over the leased property owned by the lessor is transferred to the lessee. The following are indicators of past event: a. the specification of a past event differentiates assets from intentions to acquire assets, which are not to be recognized. b. a transaction or event giving rise to control of the future economic benefits must have occurred. The following are indicators of future economic benefits: a. distinguishable from the source of the benefit i.e. the particular physical resource or legal right; b. does not imply that assets necessarily generate cash flows, the benefits can also be in the form of ‘service potential’; c. in determining whether a resource or right needs to be accounted for as an asset, the potential to contribute to the objectives of the entity should be the prime consideration; d. capacity to contribute to activities/objectives/programs; and e. the fact that an asset cannot be sold does not preclude it from providing future economic benefits. Sec. 32. Recognition of an Asset. An asset shall be recognized in the financial position when and only when (a) it is probable that the future economic benefits will flow to the entity; and (b) the asset has a cost or value that can be measured reliably. The following are indicators of probable inflow of future economic benefits: a. the chance of benefits arising is more likely rather than less likely (e.g. greater than 50%). b. benefits can be expected on the basis of available evidence or logic. The following are indicators of reliable measurement: a. valuation method is free from material error or bias. b. faithful representation of the asset’s benefits. c. reliable information will, without bias or undue error, faithfully represent those transactions and events. 11  Sec. 33. Accounting Standards for Revenue. The following accounting standards shall apply for revenue and receipts of government entities: a. Revenue includes only the gross inflows of economic benefits or service potential received and receivable by the entity in its own account. (PPSAS 9) b. Receipts/Collections shall refer to all cash actually received from all sources during a given accounting period. c. Fines shall include economic benefits or service potential received or receivable by a public sector agency, as determined by a court or other law enforcement body, as a consequence of the breach of laws or regulations. Fines and penalties, either on tax revenue or other specific income account, shall be recognized as income of the year these were collected. d. Gifts and donations shall consist of voluntary transfers of assets including cash or other monetary assets, goods in-kind and services in-kind that one agency makes to another, normally free from stipulations. (PPSAS 23) e. Goods in-kind are tangible assets transferred to an agency in a non-exchange transaction, without charge, but may be subject to stipulations. External assistance provided by multilateral or bilateral development organizations often includes a component of goods in-kind. (PPSAS 23) f. Taxes are economic benefits or service potentials compulsory paid or payable to public sector agencies, in accordance with laws and or regulations, established to provide revenue to the government. Taxes do not include fines or other penalties imposed for breaches of the law. (PPSAS 23) g. Transfers are inflows of future economic benefits or service potential from non- exchange transactions, other than taxes. (PPSAS 23) Sec. 34. Use of Appropriated Funds. All moneys appropriated for functions, activities, projects and programs shall be available solely for the specific purposes for which these are appropriated. Sec. 35. Appropriation for Loan Proceeds. Expenditures funded by foreign and domestic borrowings shall be included within the expenditure program of the entity concerned. Loan proceeds, whether in cash or in kind, shall not be used without the corresponding release of funds through a Special Budget. Sec. 36. Basic Requirements for Disbursements and the Required Certifications. Disbursements of government funds shall comply with the following basic requirements and certifications: a. Availability of allotment/budget for obligation/utilization certified by the Budget Officer/Head of Budget Unit; b. Obligations/Utilizations properly charged against available allotment/budget by the Chief Accountant/Head of Accounting Unit; c. Availability of funds certified by the Chief Accountant. The Head of the Accounting Unit shall certify the availability of funds before an Agency Head or his duly authorized representative enter into any contract that involves the expenditure of public funds based on the copy of budget release documents; 12  d. Availability of cash certified by the Chief Accountant. The Head of the Accounting Unit shall certify the availability of cash and completeness of the supporting documents in the disbursement voucher and payroll based on the Registry of Allotments and Notice of Cash Allocation/Registry of Allotment and Notice of Transfer of Allocation; e. Legality of the transactions and conformity with existing rules and regulations. The requesting and approving officials shall ensure that the disbursements of government funds are legal and in conformity with applicable rules and regulations; f. Submission of proper evidence to establish validity of the claim. The Head of the Requesting Unit shall certify on the necessity and legality of charges to allotments under his/her supervision as well as the validity, propriety and legality of supporting documents. All payments of government obligations and payables shall be covered by Disbursement Vouchers (DV)/Payrolls together with the original copy of the supporting documents which will serve as basis in the evaluation of authenticity and authority of the claim. It should be cleared, however, that the submission of the supporting documents does not preclude reasonable questions on the funding, legality, regularity, necessity and/or economy of the expenditures or transactions; and g. Approval of the disbursement by the Head of Agency or by his duly authorized representative. Disbursement or disposition of government funds or property shall invariably bear the approval of the proper officials. The DVs/Payrolls shall be signed and approved by the head of the agencies or his duly authorized representatives. Sec. 37. Certification of Availability of Funds. No funds shall be disbursed, and no expenditures or obligations chargeable against any authorized allotment shall be incurred or authorized in any department, office or agency without first securing the certification of its Chief Accountant or head of accounting unit as to the availability of funds and the allotment to which the expenditure or obligation may be properly charged. No obligation shall be certified to accounts payable unless the obligation is founded on a valid claim that is properly supported by sufficient evidence and unless there is proper authority for its incurrence. Any certification for a non-existent or fictitious obligation and/or creditor shall be considered void. The certifying official shall be dismissed from the service, without prejudice to criminal prosecution under the provisions of the Revised Penal Code. Any payment made under such certification shall be illegal and every official authorizing or making such payment, or taking part therein or receiving such payment, shall be jointly and severally liable to the government for the full amount so paid or received. (Book VI, Section 41 of EO No. 292) Sec. 38. Prohibition against the Incurrence of Overdraft. Heads of departments, bureaus, offices and agencies shall not incur nor authorize the incurrence of expenditures or obligations in excess of allotments released by the DBM Secretary for their respective departments, offices and agencies. Parties responsible for the incurrence of overdrafts shall be held personally liable therefor. (Book VI, Chapter 5, Section 41 of EO No. 292) Sec. 39. Mode of Disbursements. Payments/Disbursements by NGAs may be effected through the Treasury Single Account (TSA), by issuing Modified Disbursements System (MDS) check or commercial check, cash through cash advance, Advice to Debit Account (ADA), or Non-Cash Availment Authority (NCAA). 13  Sec. 40. Authority to Disburse/Pay. NGAs are authorized to disburse/pay based on the Notice of Cash Allocation (NCA), Notice of Transfer of Allocation (NTA), Cash Disbursement Ceiling (CDC) or other authority that may be provided by law. Sec. 41. Disbursement Voucher/Payroll. Checks/ADA shall be drawn based on duly approved disbursement voucher or payroll. Sec. 42. Maintenance of Records. All checks/ADA drawn during the day, whether released or unreleased including cancelled checks shall be recognized chronologically in the Checks/ADA Disbursement Record maintained by the Cash/Treasury Unit. Sec. 43. Reporting of Disbursements. All payments/disbursements shall be reported using the prescribed forms for recording in the books of accounts. 14  Chapter 3 BUDGET EXECUTION, MONITORING AND REPORTING Sec. 1. Scope. This Chapter prescribes the guidelines in monitoring, accounting and reporting of the budget in the financial statements. This also prescribes the records to be maintained by the national government agencies, forms to be used and reports to be prepared to effectively monitor the budget as well as the required information disclosure and presentation of budget information in the financial statements in accordance with PPSAS 24. Sec. 2. Definition of Terms. For the purpose of this Manual, the terms stated below shall be construed to mean as follows: a. Allotment – is an authorization issued by the DBM to NGAs to incur obligations for specified amounts contained in a legislative appropriation in the form of budget release documents. It is also referred to as Obligational Authority. b. Appropriation – is the authorization made by a legislative body to allocate funds for purposes specified by the legislative or similar authority. c. Approved Budget – is the expenditure authority derived from appropriation laws, government ordinances, and other decisions related to the anticipated revenue or receipts for the budgetary period. The approved budget consists of the following: UACS Code New General Appropriations 01 Continuing Appropriations 02 Supplemental Appropriations 03 Automatic Appropriations 04 Unprogrammed Funds 05 Retained Income/Funds 06 Revolving Funds 07 Trust Receipts 08 d. Automatic Appropriations – are the authorizations programmed annually or for some other period prescribed by law, by virtue of outstanding legislation which does not require periodic action by Congress. e. Budget Information – the budgetary information consists of, among others, data on appropriations or the approved budget, allotments, obligations, revenues and other receipts, and disbursements. f. Continuing Appropriations – are the authorizations to support obligations for a specific purpose or project, such as multi-year construction projects which require the incurrence of obligations even beyond the budget year. g. Disbursements – are the actual amounts spent or paid out of the budgeted amounts. h. Final Budget – is the original budget adjusted for all reserves, carry-over amounts, transfers, allocations and other authorized legislative or similar authority changes applicable to the budget period. 15  i. New General Appropriations – are annual authorizations for incurring obligations during a specified budget year, as listed in the GAA. j. Obligation – is an act of a duly authorized official which binds the government to the immediate or eventual payment of a sum of money. Obligation maybe referred to as a commitment that encompasses possible future liabilities based on current contractual agreement. k. Original Budget – is the initial approved budget for the budget period usually the General Appropriations Act (GAA). The original budget may include residual appropriated amounts automatically carried over from prior years by law such as prior year commitments or possible future liabilities based on a current contractual agreement. l. Revenues – are increases in economic benefits or service potential during the accounting period in the form of inflows or increases of assets or decreases of liabilities that result in increases in net assets/equity, other than those relating to contributions from owners. m. Supplemental Appropriations – are additional appropriations authorized by law to augment the original appropriations which proved to be insufficient for their intended purpose due to economic, political or social conditions supported by a Certification of Availability of Funds (CAF) from the BTr. Sec. 3. Fund Release Documents. With the adoption of the UACS and the Performance-Informed Budgeting (PIB), the following are the fund release documents: a. Obligational Authority or Allotment – the following are the documents which authorize the entity to incur obligations: 1. General Appropriations Act Release Document (GAARD) – serves as the obligational authority for the comprehensive release of budgetary items appropriated in the GAA, categorized as For Comprehensive Release (FCR). 2. Special Allotment Release Order (SARO) – covers budgetary items under For Later Release (FLR) (negative list) in the entity submitted Budget Execution Documents (BEDs), subject to compliance of required documents/clearances. Releases of allotments for Special Purpose Funds (SPFs) (e.g., Calamity Fund, Contingent Fund, E-Government Fund, Feasibility Studies Fund, International Commitments Fund, Miscellaneous Personnel Benefits Fund and Pension and Gratuity Fund) are also covered by SAROs. 3. General Allotment Release Order (GARO) – is a comprehensive authority issued to all national government agencies, in general, to incur obligations not exceeding an authorized amount during a specified period for the purpose indicated therein. It covers automatically appropriated expenditures common to most, if not all, agencies without need of special clearance or approval from competent authority, i.e. Retirement and Life Insurance Premium. b. Disbursement Authority – the following documents authorize the entity to pay obligations and payables: 1. Notice of Cash Allocation (NCA) – authority issued by the DBM to central, regional and provincial offices and operating units to cover the cash requirements of the agencies; 16  2. 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 loans/grants through supplier’s credit/constructive cash; 3. Cash Disbursement Ceiling (CDC) – authority issued by DBM to the Department of Foreign Affairs (DFA) and Department of Labor and Employment (DOLE) to utilize their income collected/retained by their Foreign Service Posts (FSPs) to cover their operating requirements, but not to exceed the released allotment to the said post; and 4. Notice of Transfer of Allocation – authority issued by the Central Office to its regional and operating units to cover the latter’s cash requirements. Sec. 4. Classification of Expenditures. Expenditures of NGAs shall be classified into categories as may be determined by the DBM including, but not limited to the following: a. Entity incurring the obligation; b. Program, Activity and Project (PAP); c. Object of expenditures, including personnel services (PS), maintenance and other operating expenditures (MOOE), financial expenses (FE), and capital outlays (CO); d. Region or locality of use; e. Economic or functional classification of the expenditures; f. Obligational authority and cash transactions arising from fund releases; and g. Such other classifications as may be necessary for the budget process. Sec. 5. Monitoring of the Budget. The budget shall be monitored by the Budget Division/Units of NGAs through the maintenance of registries for that purpose. Sec. 6. Registries of Revenue and Other Receipts. The Registries of Revenue and Other Receipts (Appendices 7, 7A, 7B, 7C and 7D) shall be maintained by the Budget Division/Unit of NGAs to monitor the revenue and other receipts estimated/budgeted, collected and remitted/deposited. Sec. 7. Procedures in Monitoring and Recognizing Revenue and Other Receipts a. Recognizing Estimated Revenue/Other Receipts Area of Seq. Activity Responsibility No. Budget Division/Unit Staff Concerned 1 Receives copy of the Estimated Revenue per Approved Budget of the Agency (ERABA). Records the same in the logbook and forwards the ERABA and the supporting documents (SDs) to the Budget Staff. 17  Area of Seq. Activity Responsibility No. Budget Staff 2 Records the estimated revenue/other receipts in the appropriate column of the RROR. Files the RROR and the copy of ERABA for reference. b. Recognizing Revenue/Other Receipts Collected and Deposited Area of Seq. Activity Responsibility No. Budget Division/Unit Staff Concerned 1 Receives from the Cash/Treasury Unit or other unit concerned of the entity the copy of the Report of Collections and Deposits (RCD), TRA (Note 1), Cash Receipts Register (CRReg) (Note 2) and Credit Memo/Abstract of Deposits (Note 3). Records the same in the logbook and forwards the documents to the Budget Staff. Note 1 – The TRA is used by the Bureau of Internal Revenue (BIR) to recognize the income from taxes withheld by various NGAs. Note 2 – The CRReg is used by operating units of NGAs without complete set of books of accounts such as foreign- based government agencies, etc. Note 3 – The Credit Memo/Abstract of Deposits from the bank is used to recognize revenue deposited with the National Treasury through the AGDBs or Authorized Agent Banks (AABs). Budget Staff 2 Records the collections of revenue/other receipts/constructive receipts of revenue under the appropriate column of the RROR. Files the RROR and the copy of RCD and supporting documents for reference. Sec. 8. Registry of Appropriations and Allotments. The Registry of Appropriations and Allotments (RAPAL) (Appendix 8) shall be maintained by NGAs to monitor appropriations and allotments charged thereto. It shall show the original, supplemental and final budget for the year and all allotments received charged against the corresponding appropriation. The balance is extracted every time an entry is made to prevent incurrence of overdraft in appropriations. Separate RAPAL shall be maintained by fund cluster and by Major Final Output (MFO)/PAP/Appropriation Acts. 18  Sec. 9. Procedures in Recording Appropriations and Allotments. The procedures for recording appropriations and allotments are as follows: Area of Seq. Activity Responsibility No. Staff Concerned 1 Receives the GAA and the allotment release documents from the DBM. Records the same in the logbook and forwards these documents to the Budget Staff for recording in the RAPAL and RAOD. Budget Staff 2 Records the appropriations and allotments in the appropriate columns of the RAPAL and the RAOD. Forwards a copy of the allotment release documents to the Accounting Division/Unit for reference. Note – The amount of allotment should not exceed the authorized appropriations in the GAA. If the allotment exceeds the appropriation, appropriate actions should be taken. Sec. 10. Registries of Allotments, Obligations and Disbursements. The Registries of Allotments, Obligations and Disbursements (RAOD) shall be maintained by the Budget Division/Unit of agencies to record allotments, obligations and disbursements. It shall show the allotments received for the year, obligations incurred against the corresponding allotment and the actual disbursements made. The balance is extracted every time an entry is made to prevent incurrence of obligations in excess of allotment and overdraft in disbursements against obligations incurred. The RAODs shall be maintained by appropriation act, fund cluster, MFO/PAP, and allotment class. a. Registry of Allotments, Obligations and Disbursements-Personnel Services (RAOD-PS) (Appendix 9A) shall be used to record the allotments received, obligations incurred and disbursements classified under PS. b. Registry of Allotments, Obligations and Disbursements-Maintenance and Other Operating Expenses (RAOD-MOOE) (Appendix 9B) shall be used to record the allotments received, obligations incurred and disbursements classified under MOOE. c. Registry of Allotments, Obligations and Disbursements-Financial Expenses (RAOD-FE) (Appendix 9C) shall be used to record the allotments received, obligations incurred and disbursements classified under FE. d. Registry of Allotments, Obligations and Disbursements-Capital Outlays (RAOD-CO) (Appendix 9D) shall be used to record the allotments received, obligations incurred and disbursements classified under CO. Sec. 11. Obligation Request and Status. The incurrence of obligations shall be made through the issuance of Obligation Request and Status (ORS) (Appendix 11). The ORS shall be prepared by the Requesting/Originating Office supported by valid claim documents like DVs, payrolls, purchase/job orders, itinerary of travel, etc. The Head of the Requesting/Originating Office or his/her authorized representative shall certify in the Section A of the ORS as to the necessity and legality of charges to the budget under his/her supervision, and validity, propriety and legality of SDs. The Head of the Budget Division/Unit shall certify to the availability of allotment and such is duly obligated by signing in Section B of the ORS. 19  Sec. 12. Subsidiary Record for Obligation. A subsidiary record to monitor a particular obligation shall be maintained by the Budget Division/Unit in Section C of the ORS. It shall contain the original amount of obligation, payable (goods delivered and services rendered) and the actual amount paid. Sec. 13. Adjustment of Obligation. Adjustment of obligation incurred after the processing of the claim by the Accounting Division/Unit shall be made through the use of Notice of Obligation Request and Status Adjustment (NORSA) (Appendix 12). The adjustment shall be effected through a positive entry (if additional obligation is necessary) or a negative entry (if reduction is necessary) in the ‘Obligation’ column of the ORS and RAOD. Sec. 14. Notice of Obligation Request and Status Adjustment. The NORSA shall be prepared by the Accounting Division/Unit after the processing of the claim which shall be used in adjusting the original amount obligated to the actual obligations incurred in the RAOD. It shall be forwarded by the Accounting Division/Unit to the Budget Division/Unit to take up the adjustments of obligation in the RAOD. The following transactions shall also need adjustments of obligations: Transactions Supporting Documents a. Refund of cash advance granted during Certified copies of official receipts and the year other SDs b. Over/Underpayment of expenditures Certified copies of official receipts and during the year bills and other SDs c. Disallowances pertaining to expenses Certified copies of official receipts and incurred during the validity period of bills, notice that the disallowances are the budget that became final and final and executory, and other SDs executory during the same period Sec. 15. Procedures in Recording Obligation. Obligation shall be recorded in the appropriate RAOD through ORS with the following procedures: Area of Seq. Activity Responsibility No. Budget Division/Unit Staff Concerned 1 Receives the ORS, duly signed by the Head of the Requesting Office, including copies of DV/Payroll, Contract/Purchase Order (PO) and other SDs from office/personnel concerned. Verifies completeness of the documents. If complete, records the same in the logbook maintained for the purpose and forwards the documents to the Budget Staff for processing. If incomplete, returns the documents to the Requesting Office for completion. Budget Staff 2 Receives the ORS and its SDs from the Staff concerned. Verifies availability of allotment based on the appropriate RAOD. If allotment is not available, returns the documents to the office/personnel concerned. 3 If allotment is available, assigns number on the ORS based on the Control Logbook maintained for the purpose. Records the amount obligated based on the ORS in the ‘Obligation’ column of the RAOD. Initials 20  Area of Seq. Activity Responsibility No. in Section B of the ORS and forward all copies of the documents to the Head of the Budget Division/Unit for signature. Head of Budget 4 Reviews the ORS and SDs. If in order, signs the Division/Unit certification in Section B of the ORS. Forwards the ORS and SDs to the Budget Staff. Budget Staff 5 Forwards the ORS and SDs to the Accounting Division/Unit for processing of the claim. Retains original copy of the ORS for maintenance/monitoring of obligation status. Note – For the succeeding activities, refer to Chapter 6- Disbursements. Sec. 16. Recording of Disbursement in the RAOD. The disbursements shall be posted under the ‘Payment’ column of Section C of the ORS based on the Reports of Checks Issued (RCI)/Report of ADA Issued (RADAI) (Appendix 13)/TRA and JEV and recorded in the appropriate RAOD by the Budget Division/Unit. Sec. 17. Procedures for the Recording of Disbursements and Adjustment of Obligation. The procedures for the recording of disbursements and adjustment of obligation are as follows: Area of Seq. Activity Responsibility No. Budget Division/Unit Staff Concerned 1 Receives copies of RCI, RADAI, TRA, JEV and NORSA from the Accounting Division/Unit as basis for posting in Section C of the ORS and recording to RAOD. Records in the Logbook and forwards the RCI, RADAI, TRA, JEV and NORSA to Budget Staff concerned for recording in the RAOD and updating Section C of the ORS. Recording of Disbursements Budget Staff 2 Posts the RCI/RADAI/TRA/JEV and pertinent Check/ADA/TRA numbers in Section C, ‘Payment’ column of the ORS and ‘Disbursements’ column of the RAOD. 3 In Section C of the ORS, determines the balance of unpaid obligations by subtracting the amount of disbursements from obligations. Files the RCI, RADAI, TRA, JEV and other documents for reference. Adjustment of Obligation 4 Posts the NORSA in the ‘Obligation’ column of Section C of the ORS. If the original amount is lesser than the actual obligation after the processing of the claim, a 21  Area of Seq. Activity Responsibility No. positive entry corresponding to additional obligation shall be recorded in the RAOD based on the NORSA. If the original obligation is greater, a negative entry representing the excess shall be recorded in the RAOD. Sec. 18. Registries of Budget, Utilization and Disbursements. The Registries of Budget, Utilization and Disbursements (RBUD) shall be used to record the approved special budget and the corresponding utilizations and disbursements charged to retained income authorized under R.A. 8292 for SUCs and other retained income collection of a national government agency with similar authority, Revolving Funds and Trust Receipts/Custodial Funds. It shall be maintained by legal/authority, fund cluster, MFO/PAP and budget classification. a. Registry of Budget, Utilization and Disbursements-Personnel Services (RBUD-PS) (Appendix 10A) shall be used to record the budget utilizations and disbursements classified under PS. b. Registry of Budget, Utilization and Disbursements-Maintenance and Other Operating Expenses (RBUD-MOOE) (Appendix 10B) shall be used to record the budget utilizations and disbursements classified under MOOE. c. Registry of Budget, Utilization and Disbursements-Financial Expenses (RBUD-FE) (Appendix 10C) shall be used to record the budget utilizations and disbursements classified under FE. d. Registry of Budget, Utilization and Disbursements-Capital Outlays (RBUD-CO) (Appendix 10D) shall be used to record the budget utilizations and disbursements classified under CO. Sec. 19. Budget Utilization Request and Status. The incurrence of budget utilization shall be made through the issuance of Budget Utilization Request and Status (BURS) (Appendix 14). The BURS shall be prepared by the Requesting/Originating Office supported by valid claim documents like DV, payroll, purchase/job order, itinerary of travel, etc. The Head of Requesting/Originating Office or his/her authorized representative shall certify in Section A of the BURS as to the necessity and legality of charges to the budget under his/her supervision, and validity and propriety of SDs. The Head of Budget Division/Unit shall certify to the availability of budget and its utilization in accordance with its purpose by signing in Section B of the BURS. Sec. 20. Subsidiary Record for Budget Utilization. The Section C of the BURS shall serve as the subsidiary record to monitor budget utilization to be maintained by the Budget Division/Unit. It shall contain the original amount of utilization, payable (goods delivered and services rendered) and the actual amount paid after the processing of the claim. Sec. 21. Adjustment of Budget Utilization. Adjustment of budget utilization after the processing of the claim by the Accounting Division/Unit shall be made through the use of Notice of Budget Utilization Request and Status Adjustment (NBURSA) (Appendix 15). The adjustment shall be effected thru a positive entry (if additional utilization is necessary) or a negative entry (if reduction is necessary) in the ‘Utilization’ column of the BURS and RBUD. Sec. 22. Notice of Budget Utilization Request and Status Adjustment. The NBURSA shall be prepared by the Accounting Division/Unit after the processing of the claim which shall be used in adjusting the original amount utilized to the actual utilizations in the RBUD. It shall be forwarded by the Accounting Division/Unit to Budget Division/Unit to take up 22 the adjustments of utilization in the RBUD. The following transactions shall also need adjustments of budget utilizations: Transactions Supporting Documents a. Refund of cash advance granted during Certified copies of official receipts and the year other SDs b. Over/Underpayment of expenditures Certified copies of official receipts and during the year bills and other SDs c. Disallowances pertaining to expenses Certified copies of official receipts and incurred during the validity period of bills, notice that the disallowances are the budget that became final and final and executory, and other SDs executory during the same period Sec. 23. Recording of Disbursement in the RBUD. The disbursement shall be posted in Section C of the BURS and recorded in the appropriate RBUD based on the RCI, RADAI, TRA and JEV furnished by the Cashier/Accounting Units to Budget Division/Unit. Sec. 24. Procedures in Monitoring Budget, Utilizations and Disbursements charged to Retained Income, Revolving Funds and Trust Receipts/Custodial Funds. The procedures are as follows: Area of Seq. Activity Responsibility No. Posting of Approved Budget Budget Division/Unit Receiving/Releasing 1 Receives the approved budget (AB) from the concerned Staff entity official. Records the same in the logbook and forwards the AB to the Staff Concerned for recording in the appropriate RBUD. Staff Concerned 2 Records the AB in the ‘Budgeted Amount’ column of the RBUD and forwards copies of the budget documents to the Accounting Division/Unit for reference. Posting of Utilization Receiving/Releasing 3 Receives the BURS, duly signed by the head of the Staff Requesting Office including copies of DV/Payroll, Contract/PO and other SDs from concerned office/personnel. Verifies completeness of the documents. If complete, records the same in the logbook maintained for the purpose and forwards the documents to Staff Concerned for recording of utilizations in the appropriate RBUD. If incomplete, returns the documents to Requesting Office for completion. Staff Concerned 4 Receives the BURS and its SDs from Receiving/Releasing Staff. Verifies availability of budget based on the appropriate RBUD. 5 If budget is available, assigns number on the BURS based on the Control Logbook maintained for the purpose. Records the amount utilized based on the BURS in the ‘Utilization’ column of the RBUD. Initials in Section B of the BURS and forward all copies of the documents to the Head of the Budget Division/Unit for signature. If budget 23  Area of Seq. Activity Responsibility No. is not available, returns the documents to the office/personnel concerned. Head of Budget 6 Reviews the BURS and SDs. Signs the certification in Division/Unit Section B of the BURS. Forwards to the Staff Concerned the BURS and SDs. Staff Concerned 7 Records in the logbook the release of the BURS and SDs to the Accounting Division/Unit for processing of the claim. Retains original copy of the BURS for maintenance/monitoring of utilization status. Note – For the succeeding activities, refer to Chapter 6- Disbursements. Posting of Disbursement Receiving/Releasing 8 Records in the logbook the receipt of the RCI and RADAI Staff from the Cash Unit, and TRA, JEV and NBURSA from the Accounting Division/Unit. Forwards the same to Staff Concerned. Staff Concerned 9 Posts the RCI/RADAI/TRA/JEV in Section C, Payment column of the BURS and to the Disbursement column of the RBUD. 10 In Section C of the BURS, determines the balance of unpaid utilizations. Files the RCI, RADAI, TRA, JEV and other documents for reference. Adjustment of Utilization Staff Concerned 11 Posts the NBURSA in the ‘Utilization’ column of Section C of the BURS. For any excess of the actual budget utilization over the original amount, a positive entry corresponding to additional utilization shall be recorded in the RBUD based on the NBURSA. If the original utilization is greater, a negative entry representing the excess shall be recorded in the RBUD. Sec. 25. Presentation of Budget Information in the Financial Statements on a Comparable Basis. An entity shall prepare a comparison of the budget and actual amounts spent as a separate statement since the budget and the financial statements are not prepared on a comparable basis in accordance with PPSAS (Par. 23, PPSAS 24). Sec. 26. Statement of Comparison of Budget and Actual Amounts. This shall be prepared based on the various registries maintained by the Budget Division/Unit such as the RRORs, RAPAL, RAOD/RBUD and other SDs. The data on Actual Amounts shall be verified by the Accounting Division/Unit in the Statement of Cash Flows (SCF). The statement shall present the following: a. The original (approved appropriations, prior year’s not yet due and demandable obligations) and final budget (continuing appropriations, transfers, realignments and withdrawals) amounts; b. The actual amounts on a comparable basis; and 24  c. By way of note disclosure, an explanation of the material differences between the budget and actual amounts, which are not included in the financial statements. (NAME OF THE ENTITY) STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNT (ALL FUNDS OR NAME OF FUND) FOR THE YEAR ENDED DECEMBER 31, 2015 (in thousand pesos) Actual Difference Budgeted Amounts Amounts on Final Particulars Comparable Budget Original Final Basis and Actual Notes RECEIPTS Tax Revenue 3.13 & 3.15 xxx xxx xxx xxx Services and Business Income 3.14 & 3.15 xxx xxx xxx xxx Assistance and Subsidy 3.13 & 3.15 xxx xxx xxx xxx Shares, Grants and Donations 3.13 & 3.15 xxx xxx xxx xxx Gains 3.14 & 3.15 xxx xxx xxx xxx Others 3.15 xxx xxx xxx xxx Total Receipts xxx xxx xxx xxx PAYMENTS Personnel Services 3.15 xxx xxx xxx xxx Maintenance and Other Operating Expenses 3.15 xxx xxx xxx xxx Capital Outlay 3.15 xxx xxx xxx xxx Financial Expenses 3.15 xxx xxx xxx xxx Others 3.15 xxx xxx xxx xxx Total Payments xxx xxx xxx xxx NET RECEIPTS/PAYMENTS xxx xxx xxx xxx The above statement should be read in conjunction with the accompanying notes. Sec. 27. Changes from Original to Final Budget. An entity shall present an explanation of whether the changes between the original and final budget are a consequence of reallocations within the budget by way of note disclosure in the FSs. Sec. 28. Reconciliation of Actual Amounts on a Comparable Basis (Budget) and Actual Amounts in the Financial Statements. The actual amounts presented on a comparable basis to the budget shall be reconciled with the actual amounts presented in the FSs identifying separately the differences classified as follows: a. Basis Differences, which occur when the approved budget is prepared on a basis other than the accounting basis; b. Timing Differences, which occur when the budget period differs from the reporting period reflected in the FSs; and c. Entity Differences, which occur when the budget omits program or entities that are part of the entity for which the FSs are prepared. The reconciliation shall be disclosed as part of the Notes to the FSs. Sec. 29. Disclosures of Budgetary Basis, Period and Scope. An entity shall explain in the notes to the FSs the budgetary basis (cash or accrual, or some modification thereof) used in the preparation and presentation of the budget and the accounting basis used in the financial 25 statements. The period and the entities included in the approved budget shall also be identified in the notes to financial statements. Sec. 30. Procedures for the Preparation of the Statement of Comparison of Budget and Actual Amounts Area of Seq. Activity Responsibility No. Budget Division/Unit Staff Concerned 1 Based on the RRORs, RAPAL, RAODs/RBUDs and SDs, obtain the data on budgeted and actual revenue, appropriations, allotments, obligations/utilizations and disbursements and post these in the appropriate column of the SCBAA. Note 1 – The number in the ‘Notes’ column shall correspond to those shown in the Notes to FS prepared by the agency. Note 2 – The Receipts portion of the statement shall contain the various revenue and other receipts of the agency showing the following: a. Budgeted Amount: Original – the approved estimated revenue of the entity per major