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Efficiency refers to the relationship between goods or services produced and resources used

to produce them. The measurement of efficiency involves the determination of whether an

agency is managing or utilizing its resources in an efficient manner as well as establishing the
causes of any inefficiencies, including inadequacy in management information systems,
administrative procedures or organizational structure.

Effectiveness is concerned with the relationship between the outputs and the goals of the
agency. Measuring effectiveness will determine whether the desired results are achieved,
whether the objectives set by the agency are met, and whether the agency has considered
alternatives that yield desired results at a lower cost.

Generally Accepted (State) Accounting Principles

Accounting principles are propositions, a general law or rule adopted, which on the basis
of reasons, demonstrated usefulness and general acceptance as the best way of carrying out
the function and achieving the objectives of financial accounting.

1. Guide the accountants in identifying, measuring and communicating financial accounting
2. Assure proper reporting and reasonable degree of uniformity and comparability among
the financial statements of different government entities; and
3. Provide auditors with the framework for making judgment about the fairness of financial
statements on the basis of some uniform standards.

Significant differences in principles between state accounting and commercial accounting:

1. Government activities are non-profit oriented;
2. State accounting places greater emphasis on accountability, stewardship and control;
3. State accounting is based on laws, rules and regulations.

A principle is generally accepted if it has substantial authoritative support. There are two
sources of support: primary and secondary sources

Primary sources:

1. Pronouncement of the Commission on Audit - COA is mandated by the Philippine

Constitution to promulgate accounting rules and regulations to facilitate the keeping
and enhance the informational value of the accounts of the government.

2. Provision of law - Sec. 112 of the PD 1445 provides that generally accepted
accounting principles should be observed in government accounting entities as
provided they do not contravene existing laws and regulations.

Secondary source: