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Government Accounting Defined (Section 109 of PD 1445)
Government Accounting Defined (Section 109 of PD 1445)
College of Accountancy
Cebu City
National Government Agency (NGA) – are agencies that includes all departments,
bureaus, offices, boards, commissions, councils state colleges and universities.
To provide quantitative information primarily financial in nature about the operations of the
government, both national and local, to be used by the administration in making decisions for a
more effective and efficient public service.
OBJECTIVES
1.To provide quantitative information concerning past operations and present conditions.
2.To provide a basis for guidance for future operations.
3.To provide for control of the account of public entities and officers in the receipt, disposition
and utilization funds and properties, and
4.To report on the financial position and the result of the operations of the government agencies
for the information of all persons concerned.
2. Purpose - Private enterprises are organized primarily to make profits. The government
is set up mainly to render service at lowest possible cost to its constituents.
4. Financing - Private enterprise is supported for its finance primarily by the voluntary
contribution from its members or stockholders which constitute as their share of capital or
investment in the business. The government is vested the exclusive right to demand involuntary
contributions from its constituent in the form of taxes.
1. Objective –
CA – is geared towards income measurements aside from control of company
resources,
GA - is control of government funds to see to it that they are properly utilized and
provide data to management for decision.
2. Basis of Accounting -
CA – either cash or accrual method is used but not a combination of both.
GA - the modified accruals basis of accounting is used.
4. Control Mechanism –
CA – none
GA – Fund accounting, obligation accounting and CDC accounting
5. Books of Accounts –
CA - only one set is kept
GA - one set of books is kept , Regular Agency (RA) Book, and maintain
Registries for budget accounts.
The ultimate authority for decision-making in the Philippine government rests with the people.
This authority is exercised through duly elected representatives, acting as agents of the people.
It is the sovereign right of the people to change them if the authority is misused or abused.
The President, as chief executive, formulates national policies, which specify the goals of
government and determine the courses of action that the government should take in different
aspects of public affairs.
On the basis of national policy, the President submits a budget to the legislative body for
consideration and processed until approved and passed into a law.
At all levels of government, decision-making should comply with existing laws and regulations.
Questions and issues involving the settlement of money claims, determination of dispute or
settlement of a controversy on the issue as to legality and/or propriety of such claims are
submitted for resolution to the COA in connection with the discharge of its audit function.
Questions involving legal interpretation and/or application of law are submitted for decision to
the courts.
The financial resources of the Government are very limited. It relies heavily on collected
taxes. This means that it has to operate through a system of fiscal and accounting controls. The
following control mechanisms adopted as sub-systems of government accounting are not
adopted in commercial accounting:
Fund Accounting
Obligation Accounting
Cash Disbursement Ceiling (CDC) Accounting
Fund Accounting. A fund is a sum of money or other resources set aside for the
purpose of carrying out specific activities or attaining certain objectives in accordance with
specific regulations, restriction, and limitations.
The two major classification of funds as to purpose for which they may be used:
1. General Fund – one which is generally available for all functions of the
government.
2. Special Fund - one which, by legislative action, segregates specified revenues
for limited purposes.
Obligation accounting refers to the accounting practice, procedures and techniques for
recording obligations in the government.
The imposition of primary responsibility on the agency head for government funds and
property is in keeping with the concept of fiscal responsibility which now lodge with agency
head.
The head of the agency shall exercise the diligence of a good father or a family in
supervising accountable officers to prevent the incurrence of loss of government funds and
property, otherwise, he shall be jointly and solidarily liable with the person primarily
accountable thereof.
The Commission on Audit serves as the external auditor of the government agencies.
It is a constitutional office and its mandates are provided in Section 2, Art. IX-D of the 1987
Constitution of the Philippines. The COA examine, audit and settle all accounts pertaining to
revenues or receipts and expenditures or uses of government funds and property, keeps the
general accounts of the national government , prescribes the standard chart of accounts,
promulgates accounting rules and regulations and exercise technical supervision over the
accounting functions of each agency. The office is mandated by the Constitution to submit to
the President and the legislative body within the time frame fixed by law, an annual audit report
of the government, its subdivision, agencies and instrumentalities including government owned
or controlled corporations and recommend measures necessary to improve efficiency and
effectiveness.
The DBM is responsible for the design, preparation, and approval of the accounting
systems of government agencies, determines the accounting and other item of information
needed to monitor budget performance and assess effectiveness of the agency operation. It
prescribes the forms, schedules of submission and other component of reporting system
needed to accomplish and submit the required information. It acts on agencies’
recommendations for the modification or changes to prescribed systems for procedures to effect
simplicity and/or meet the requirements of the peculiarities of the agencies concerned. It
approves the Agency Budget Matrix and issues the allotments to agencies in accordance with
the approved budget and issues Notice of Cash Allocation.
The Bureau of Treasury (BTr) performs banking function for the national government.
It receives and keeps government funds, controls the disbursements thereof and maintain
accounts of the financial transactions of national government agencies. It is required to prepare
and submit to the COA and other fiscal activities, a daily statements of cash receipts,
disbursements and fund balances in the National Treasury.
These agencies are required to establish and maintain a system of accounting for their financial
resources and operation in accordance with pertinent rules and regulations. Accounts should
be kept in such details as is necessary to meet the need of agency management and furnish
information to fiscal and control agencies such as COA, DBM and BTr.
In government, authority is often used interchangeably with the term "power". However,
their meanings differ: while "power" is defined as 'the ability to influence somebody to do
Section 1 of PD 1445 provides:”It is the declared policy of the State that all government
resources shall be managed, expended and utilized in accordance with law and regulations and
safeguard 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 see to it that such policy is faithfully adhered to rests directly with the chief or
head of the government agency concerned.”
This declaration articulates the concern of the state for the safekeeping of the public’s
resources. It focuses on how the resources shall be handled by those given the public trust to
manage, spend or use such resources.
Pursuant to this policy the State requires from public officers and employees the following:
1. Compliance with laws and regulations
- Laws and rules
- Agency policies
- Agency manuals of operations; and
- Provisions of contracts, MOA
2. Safeguarding of government resources from loss and waste
3. Achieving goals and objectives
When public officers and employees submit to the Commission their transactions,
accounts, financial reports and statements and other performance and operation reports, they
are asserting or claiming that they have complied with the foregoing accountability
requirements.
What is Assertions?
When the agencies issue their financial reports and statements they are asserting the
following:
1. Existence or Occurrence - This deals with whether assets or liabilities of the audited
agency actually exist at a given date, and whether recorded transactions have occurred
during the given period.
2. Completeness – This deals with whether all transactions and accounts that should be
presented in the financial statements are included.
3. Rights and Obligations - This deals with whether assets are actually owned by the
agency and liabilities are the obligation of the agency at a given date.
4. Valuation or Allocation - This deals with whether or not the asset, liability, revenue and
expenses components have been included in the financial statements at appropriate
amounts.
5. Presentation and Disclosure – This deal on whether particular components of the
financial statements are properly classified, described and disclosed.
Performance of government entities is measured from the point of view of economy, efficiency
and effectiveness.
Economy refers to the reasonableness of cost incurred. Measuring economy will determine
whether the agency has been performing at the least possible cost or under the terms most
advantageous to the government.
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.
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.
Objectives:
1. Guide the accountants in identifying, measuring and communicating financial accounting
information;
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.
A principle is generally accepted if it has substantial authoritative support. There are two
sources of support: primary and secondary sources
Primary sources:
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:
The Government Auditing Code of the Philippines requires that each government
agency shall record its financial transactions and operations in conformance with the generally
accepted accounting principles and accordance with pertinent laws and regulations. The
principles to be followed by government entities includes the following:
2. The highest standard of honesty, objectivity and consistency shall be observed in the
keeping of accounts to safeguard against inaccurate or misleading information.
3. The government accounting system shall be on double-entry basis with the general
ledger in which all financial transactions are recorded, Subsidiary record shall be kept
where necessary.
4. The Chart of Accounts has eight mandatory digits representing different account groups
and classification.
6. Matching Principles, The principle that requires the matching of revenues and expenses
is adopted.
- Modified accrual method is used
- Depreciation accounting for property, plant and equipment using the straight line
method is followed.
- Allowance for doubtful accounts is taken up. Dormant accounts are transferred o
a separate registry,
- Asset method is followed for prepaid expenses.
7. On financial statement:
9. All lawful expenditures and obligation incurred during the year shall be taken up as
accounts of that year.
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