A.) Prea5 Module 1

Module 1
 Overview of Government
Accounting
 The Budget Process
PrEa5
Governm
ent
Accounti
ng
to your 1st Module

Modulmodule!
This module is a
combination of
synchronous &
asynchronous
learning
and will last for 2
week
Pretest will be given
via
Google Form in
asynchronous test
Overview
Yves A. Mortillero
mortilleroyves2nd.2021@gmail.com
Course Coach
No part of this module may be reproduced

in any form without prior permission in
writing from the Instructor.
February 3, 2021
Date Initiated
February 15, 2021
Date of Completion
Overview of Government Accounting and the Budget Process
TABLE OF CONTENT
MODULE OUTLINE
Module Duration...........................................................................................................................................................................................3
Learning Objectives.....................................................................................................................................................................................3
Input Information..........................................................................................................................................................................................3
Learning Activities........................................................................................................................................................................................3
Assessment/Evaluation................................................................................................................................................................................4
Assignment..................................................................................................................................................................................................4
Learning Resources.....................................................................................................................................................................................4
MODULE PROPER
Intro to Government Accounting..................................................................................................................................................................5
Responsibility, Accountability and Liabilities over Government Funds........................................................................................................6
The Government Accounting Manuals (GAM).......................................................................................................................................8
Qualitative Characteristics of Financial Statements 10
Components of General Purpose Financial Statements 11
Elements of the Financial Statements 11
Budget Process 14
Budget Preparation ........... 15
Budget Legislation 18
Budget Execution 20
Budget Accountability 23
San Mateo Municipal College Module 1 / Overview of Govt Accounting and Budget Process / Page 2
College of Business and Accountancy Prepared by Yves A. Mortillero

Overview of Government Accounting and the Budget Process
MODULE 1 OUTLINE
MODULE DURATION
I. Feb 3 to Feb 15, 2021 Synchronous Meeting and Asynchronous Learning For asynchronous learning inquiries, you may
reach me through the messenger group or may send an email to mortilleroyves2nd.2021@gmail.com every Monday and
Wednesday
II. For asynchronous learning inquiries, you may reach me through email (mortilleroyves2nd.2021@gmail.com) every
Monday and Wednesday
LEARNING OBJECTIVES
After completing this module, you are expected to:

I. understand the reason for the student of government accounting
II. describe the budget process in the government
INPUT INFORMATION

Module 1

LEARNING ACTIVITIES
1. Group discussion during a synchronous meeting

2. Asynchronous Learning
Individual activity:
Collaborative activity:
OL & NOL Students:
ASSESSMENT/EVALUATION
I. Synchronous Test with a time limit.

II. Asynchronous Learning
Points to Ponder:
Using your Learning Portfolio, answer the following questions:

1. What part of the module captured your attention?
2. Why do you like the topic?
3. How will you apply the topic to your daily life?
Deadline:
ASSIGNMENT
Using the google classroom, please answer the assignment.
Progressive Requirement:
Deadline :
LEARNING RESOURCES
Government Accounting and Accounting for Non-Profit Organizations, by Zeus Vernon B. Millan
Disclaimer. DISCLOSURE STATEMENT
The contents of this module was taken from the book, Government Accounting and Accounting For Non-Profit
Organizations , by Zeus Vernon B. Millan, with an intention of putting more emphasis, guidance to accounting
students. It is not the intention of the coach to take credit to any of his wonderful and informative writings
Online resources:

Disclaimer. DISCLOSURE STATEMENT
The contents of this module was taken from the book, Government Accounting and Accounting For Non-Profit
Organizations , by Zeus Vernon B. Millan, with an intention of putting more emphasis, guidance to accounting students.
It is not the intention of the coach to take credit to any of his wonderful and informative writings.
Chapter 1
Overview of Government Accounting
Learning Objectives
1. Differentiate government accounting from the accounting for business entities.
2. State the government entities charged with accounting responsibility.
3. Describe briefly the GAM for NGAs.
4. State the basic principles used in government accounting.
5. State the recognition criteria for assets.
Introduction
"Government accounting encompasses the processes of analyzing, recording, classifying, summarizing and
communicating all transactions involving the receipt and disposition of government funds and property, and interpreting
the results thereof." (State Audit Code of the Philippines, P,D. No. 1445, Sec. 109)
The objectives of government accounting are:
a. To produce information concerning past operations and present conditions;
b. To provide a basis for guidance for future operations;

c. To provide for control of the acts of public bodies and officers in the receipt, disposition and utilization of funds
and property; and
d. To report on the financial position and the results of operations of government agencies for the information of
all persons concerned.
(PSI). No. 1445, sec, 110)
Like the accounting for business entities, government accounting is also a process of producing information that is useful
in "taking economic decisions, Government accounting, however places greater emphasis on the following:
a. Sources and utilization of government funds; and
b. Responsibility, accountability and liability of entities entrusted with
government funds and properties.
The sources of government funds include receipts from taxes and other fees, borrowings, and grants
from other governments and international bodies.
The utilization of government funds includes expenditures on programs, projects, unanticipated losses
from calamities and the like.
Responsibility, Accountability and Liability over Government Funds and Property
Responsibility over Government Funds and Property
1. Government resources shall be utilized efficiently and effectively in accordance with the law. The head of a
government agency is directly responsible in implementing this policy and is primarily responsible for government
resources entrusted to his agency. Those who are entrusted with the possession of government resources are
directly responsible to the head of the agency.
2. All those who are exercising authority over a government agency shall share fiscal responsibility.
(State Audit Code of the Philippines, P.D. No. 1445)
Accountability over Government Funds and Property

1. A government officer entrusted with the possession of government resources is responsible for the safekeeping
therefor in accordance with the law. Every accountable officer shall be properly bonded. (P.D, No. 1445 and E.O.
Mo.
292)
2. The transfer of government funds from one officer to another shall, except as allowed by law, be made only after the
authorization of the COA. The transfer shall be properly documented in an invoice and receipt. (P.D. No. 1445)
Liability over Government Funds and Property

1. The unlawful use of government resources- shall be the personal liability of the employee found to be directly
responsible therefor.
2. Every accountable officer shall be liable for all losses resulting from the unlawful use or negligence in the
safekeeping of government resources.
3. No accountable officer shall be relieved from liability merely because he has acted under the direction of a
superior officer in unlawfully utilizing the government resources entrusted to him, unless before that act, he has
notified the superior officer, in writing, that the utilization is illegal. The superior officer shall be primarily liable while
the accountable officer who fails to serve the required notice shall be secondarily liable.

4.An accountable officer shall immediately notify. the COA for any loss of government funds from
unforeseen events (force majeure) within 30 days. Failure to do so will not relieve the officer of
liability. (P.D. No. 1445)
Main concept:
Government resources must be utilized efficiently and effectively in I accordance with the law.
Government officials are responsible in implementing this policy, are accountable for the government
resources in their custody, and are liable for any loss.
The Unsung Heroes
The number of Filipinos going abroad to seek employment is increasing every year. In 2012, it was estimated that about
10.4 million Filipinos worked abroad. Almost all Filipinos know at least one other Filipino – a family member, a relative, or
a friend, who is working abroad. We refer to our overseas workers as unsung heroes. How so?
This is mainly because overseas workers remittances greatly increase the spending in our country, and the more money
is spent, the more taxes the government collects. A portion of the money we spend on almost everything (food, clothing,
bills, entertainment, medicine, rentals, etc.) represents payment of tax. Taxes are the main source of government funds
used in developing our country.
Working abroad entails great sacrifices, not only for the overseas worker but also for family members left at home. We
need efficient and effective utilization of our government resources so that someday our country men can have better
options of finding a livelihood in our country.
Accounting, as a tool for planning and control contributes to the achievement of this goal by providing information that is
useful in planning the sources and uses of government funds and comparing actual results with expected results to
promote the efficient and effective utilization of government funds.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Accounting Responsibility
The following offices are charged with government accounting responsibility:

a. Commission on Audit (COA)
b. Department of Budget and Management (DBM)
c. Bureau of Treasury (BTr)
d. Government Agencies
Commission on Audit (Audit)
The Commission on Audit (COA)
a. Has the exclusive authority to promulgate accounting and auditing rules and regulations.
b. Keeps the general accounts; of the government, supporting vouchers, and other documents,
c. Submit Financial/ reports to the President and Congress,
Department of Budget and Management (DBM)
The Department of Budget and Management (DBM) is responsible for the formulation and implementation of the
national budget with the goal of attaining the nation's socio-economic objectives,
Bureau of Treasury (BTr)

The Bureau of Treasury (BTr) functions under the Department of Finance and is the cash custodian of the government.
The BTr is authorized to:
a. Receive and keep national funds and manage and control the disbursements thereof; and
b. Maintain accounts of financial transactions of all national government offices, agencies and instrumentalities.
Government Agencies
Government agency refers to any department, bureau or office of the national government, or any of its branches and
instrumentalities, or any political subdivision, as well as any government owned or controlled corporation (GOCC),
including its subsidiaries, or other self-governing board or commission of the government. (PD. No. 1445)
The government agencies are responsible in directly implementing the projects of, and performing the functions
delegated by, the government,
Each agency (entity) shall maintain accounting books and budget registries which are reconciled with the cash records
of the BTr and the budget records of the COA and DBM.
Government agencies are required by law to have accounting units/divisions/departments,
Even a barangay (the smallest administrative division in the Philippines) is required to have an accounting unit.

The GAM for NGAs
An "old" government accounting system had been used for about five decades before it was replaced by the New
Government Accounting System (NGAS) in 2002. However, on January 1, 2016, the NGAS was replaced by the
Government Accounting Manual for National Government Agencies (GAM for NGAs),
The GAM for NGAs was promulgated primarily to harmonize the government accounting standards with international
accounting standards, particularly the International Public Sector Accounting Standards (IPSAS), The IPSASs are based
on the International Financial Reporting Standards (IFRS).
The Philippine Government has adopted the IPSAS through the Philippine Public Sector Accounting Standards (PPSAS). The
provisions of the PPSAS are incorporated in the GAM for NGAs
Since the PPSAS are based on the IPSAS, which are in turn based on the IFRSs/PFRSs, most of the concepts that we
will be learning in this book would be very familiar to you YO.

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

"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, or unconscionable expenditures, or,
uses of and properties." (Art. IX-D. Sec. 2(2L Philippine Constitution)
Coverage
The GAM for NGA’s provides the basic concepts to be used in:
a. Preparing general purpose financial statements in accordance with the Philippine Public Sector
Accounting Standards (PPSAS) and other financial reports may be laws rules and regulations; and
b. Reporting of Budget, expenditure in accordance with laws, rules and regulations.
Objectives
The GAM for NGAs aims to update the following:
a. Standards, policies, guidelines and procedures in accounting for government funds and property;
b. Coding structure and accounts; and
c. Accounting books, registries, records, forms, reports and financial statements.
(GAM for NGAs; Chapter 1, Sec. 3)
Basic Accounting and Budget reporting Principles
The financial records and reports of government entities shall

comply with the following:
1. Philippine Public Sector , Accounting Standards (PPSAS) and relevant laws, rules and regulations;
2. Accrual basis of accounting
Under the accrual basis of accounting, transactions are recognized when they occur (and not only
when cash is received or paid). Therefore, transactions are recognized in the periods to which they
relate.
3. Budget basis for presentation of budget information in the financial statements
4. Revised Chart of Accounts Prescribed by COA;
5, Double bookkeeping;
6, Financial statements based on accounting and budgetary records; and
7. Fund cluster accounting.
The books of accounts are maintained by fund cluster (i.e according to the types of funds being accounted for) as
follows:
Code Fund clusters

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
Business Related Funds
07 Trust Receipts

For example, separate accounting books (Journals and Ledgers) and budget registries shall be maintained for Regular
Agency Fund. Another separate accounting books and budget registries shall be maintained for Foreign Assisted
Projects Funds, and so on.
Qualitative Characteristics of Financial Reporting
Information reported shall meet the qualitative characteristics. Qualitative characteristics are the attributes that make
information useful to users.
a. Understandability information is understandable when users can reasonably be expected to comprehend its meaning.
Accordingly, users are assumed to have
i. reasonable knowledge of the entity's activities; and
ii. willingness to study the information.
Information about complex matters is not excluded simply because it may be too difficult for certain users to
understand.
b. Relevance information is relevant if it can assist evaluating past, present or future events or in confirming or
connecting past evaluations. In order to be information must also be timely.
c. Materiality affects the relevance of information. Information is material if its omission or misstatement could
influence
the decisions of users. Materiality depends on nature or size of the item or error, judged in the particular circumstance
of its omission or misstatement.
d .Timeliness – Information loses its relevance if there is undue delay in its reporting. The complexity of an entity’s
operations is not a sufficient reason for failing to report on a timely basis
e.Reliability - reliable information is free from material error and bias, and can be depended on by users to represent
faithfully that which it purports to represent or could reasonably be expected to represent.
Trade-offs between Relevance and Reliability

To provide timely information, it may be necessary to report before all aspects of a transaction are known, thus
impairing reliability. Conversely, if reporting is delayed until all aspects are known, the information may be highly
reliable but of little use to users who need to make decision in the interim. To achieve a balance between relevance
and reliability, the overriding consideration is how users' needs are best satisfied.
f. Faithful representation - For information to represent faithfully transactions and other events, it should be presented in
accordance with the substance of the transactions and other events, and not merely their legal form
g. Substance over form -The substance of transactions or other events is not always consistent with their legal form, If
information is to represent faithfully the transactions and other events that it purports to represent, it is necessary that
they be accounted for and presented in accordance with their substance and economic reality, and not merely their legal
forms
h. Neutrality -- Information is neutral if it is free from bias. Information shall not be selected or presented in a manner that
is designed to influence the user's decision in order to achieve a predetermined outcome.
i.Prudence is the exercise of a degree of caution when making estimates under conditions of uncertainty, such that
assets or revenue are not overstated and liabilities or expenses are not understated. However, prudence does not allow
the creation of hidden reserves or excessive provisions, the deliberate understatement of assets or revenue, or the
deliberate overstatement of liabilities or expenses, because the financial statements would not be neutral and, therefore,
not reliable.

j. Completeness — Information should be complete within the bounds of materiality and cost.
k. Comparability -- Information is comparable when users are able to identify similarities and differences between that
information and information in other reports. Comparability applies to the comparison of financial statements of different
entities and comparison of the financial statements of the same entity over different periods. Comparability requires that
users must be informed of the entity's policies, changes to those policies, and the effects of those changes and that
financial statements show corresponding information for preceding periods. (ppsas I/GAM for NGAs, Chapter 19, Sec.
6)
Components of General Purpose Financial Statements
General Purpose financial statements are those intended to meet the needs of users who are not in a position to
demand reports tailed to meet their particular information needs. (PPSAS 1.3)
The complete set of general purpose financial statement consists of:
a. Statement of Financial Position;

b. Statement of Financial Performance;
c. Statement of Changes in Net Assets/Equity;
d. Statement of Cash Flows;
e. Statement of Comparison of Budget and Actual Amounts.
f. Notes to the Financial Statements, comprising a summary, arid significant accounting policies and other
explanatory notes.
Notice that the financial statements listed above similar to those of a business entity. However, the financial statement
unique to a government entity is the "Statement Comparison of Budget and Actual Amounts" (letter 'e'). We will
elaborate on this later.
Elements of the financial statements
ASSETS
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.
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.
Control means the ability to benefit from an asset or preve nt others from benefitting from that asset.
Possession or ownership normally evidences control. However, this is not always true. For example, under a finance
lease, the lessor retains legal ownership over the leased assets but control is transferred to the lessee.
Benefit means the ability to use, exchange, lease, sell, or use the asset to settle liabilities, Or distribute it to owners.
Indicators of future economic benefits:
a. distinguishable from the source of the benefit ite. 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.
Past event -- A transaction or event giving rise to control of future economic benefits must have occurred. A mere
intention to acquire assets in the future does not result to the recognition of assets in the present.
Recognition of an Asset
An asset is recognized when:

a. it is probable that the future economic benefits will flow to the entity; and
b. the asset has a cost or value (e.g., fair value) that can be measured reliably.
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.
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.
LIABILITIES
Liabilities - are present obligations of the entity arising from events, the settlement of which is expected to result in an
from the entity of resources embodying economic benefits service potential.
EQUITY
Net assets/equity is the residual interest in the assets of the entity after deducting all its liabilities.
REVENUE
Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows
results in an increase in net assets/equity, other than increases relating to contributions from owners
> Contributions from owners are future economic benefits that have been contributed to the entity by external parties
which do not result to liabilities of the entity and for which the contributor obtains interest in the net assets of the
entity (i.e., right to dividends and right •to net assets in cases of liquidation).
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, R.D. No. 1445)
EXPENSES
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.
Distributions to owners are future economic benefits distributed by the entity to its owners, either as a return on
investment or as a return of investment.

Chapter Summary:
 Aside providing information that is useful in economic decisions, government
accounting also demonstrate the ability of the entity for the resources
entrusted to it.
 The following charged with government accounting responsibility: COA, DBM,
BTr and other
Government agencies.
 The GAM for NGAs provides the principles and procedures be applied in the
financial reporting of government entities was promulgated by the COA primarily
to harmonize the government accounting standards with international standards.
 Basic principles: Compliance with PPSAS and other laws, Accrual basis, Budget
basis, Revised chart of accounts Double entry, Financial statements based on
accounting and budgetary records, and Fund cluster accounting.
 Qualitative characteristics: Understandability, Relevance, Materiality, Timeliness,

Reliability, Faithful representation Substance over form, Neutrality, Prudence,
Completeness, and Comparability.
 An item is recognized as asset if all of the following criteria are met:

1. the item meets the definition of an asset;
2. probable inflow of future economic benefits; and
3. reliable measurement of cost or other value (e.g., fair value).

Chapter 2
The Budget Process
Learning Objectives
1. Enumerate the steps in the budget process,

2. Describe briefly the principles of responsibility accounting
The National Budget
Government accounting is primarily budgetary accounting Government accounting does not only aim to provide
information accordance on past events and transactions but also budget information in accordance with PPSAS 24.
The Philippine Constitution and other laws require government funds to be utilized in accordance with a national budget
that is duly approved by legislation. Government accounting, therefore, is concerned with providing information useful in
assessing the conformance of utilizations of government funds with the approved budget.
The national budget (government budget) is the government’s estimate of the sources and uses of government funds
within fiscal year, This forms the basis for expenditures and is the government’s key instrument for promoting its socio-
economic objectives.
The formulation and eventual utilization of the national budget are summarized in the budget cycle.
The Budget Cycle
The budget cycle has four phases, namely:

1. Budget Preparation
2, Budget Legislation
3. Budget Execution
4. Budget Accountability

Budget Preparation
The budget preparation ill the Philippines uses a "bottom-up" approach. Under “bottom up” budgeting, several parties
participate in the budget preparation, starting from the lowest to the highest levels of the government. Government
agencies are also tasked to increase the participation of citizen-stakeholders in the budget preparation. The opposite of
"bottom-up" budgeting is *'top-down" budgeting - wherein the budget preparation starts from the agency heads.
In 2011, the Philippine Government attempted to a start a new tradition by shifting from the old "incremental" system of
budgeting to the "zero-based budgeting" approach. (The Philippine Public Transparency Reporting Project, January
11.2011)
Incremental budgeting vs. Zero-based budgeting

 The current year's budget is  The current year's budget is formulated
formulated based on the previous without regard to the previous year's budget.
year's budget, which is just adjusted Government agencies are required to justify
for any variances experienced in the their current year’s proposed programs and
past. Presumably, the proposed expenditure, irrespective of whatever these
programs and expenditures in the new or carried over from the previous year.
previous year are automatically
approved in the current year.
 Uses a "roll-over" approach.  Uses a "back-to-zero" or "clean slate"

 Prone to abuse. approach.
 Promotes efficient and effective utilization
of funds.
Public Transparency Reporting Project, January 11, 2011)

1.Budget Call - The budget preparation starts when the Department of Budget and Management (DBM) issues a Budget
Call to all government agencies. The Budget Call contains among other things, the next fiscal year's other guidelines
budget ceiling, and other guidelines in the completion and submission of agency budget proposals
Relevant Terms :
 Balanced budget - prepared in such a way that revenues exceed estimated expenditures, If revenues
exceed actual expenditures, the government earns a surplus. If expenditures exceed revenues
government incurs a deficit,

 Annual budget - covers a period of one year and basis for the annual appropriation.
 Special budget - provides for items not adequately covered or not included in the general appropriations
act.
 Line item budget - focuses on specific expenditures such as salaries and wages, travel expenses, freight,
supplies materials and equipment.
 Performance budget — a plan of activities to be undertaken, including their related costs, with the emphasis
on meeting targets and desired results. The main focus is on the work to be done or services to be rendered.
 Obligations budget — focuses on expenditures incurred in the current year which are to be paid either in the
same year or in the following year.
2. Budget hearings - Budget hearings are conducted after the agencies submit their budget proposals. Each agency
defends its budget proposal before the DBM. The DBM deliberates o n the budget proposals, makes
recommendations, and consolidates the deliberated proposals into the National Expenditure Program (NEP) and
Budget of Expenditures Sources of Financing (BESF). The DBM then submits the proposed budget to the President.
3. Presentation to the Office Of the President – The President and Cabinet members review the proposed budget,
After the president approves the proposed budget, the DBM finalizes the budget documents to be submitted to the
Congress. At this point, the proposed budget is referred to as the "President's Budget.
"The "President's Budget" contains the following documents which are intended to assist the Congress in their review
and deliberation of the proposed national budget:
a. President's Budget Message -- this contains the President’s explanation of the country's fiscal policy and budget
priorities.
b. National Expenditure Program (NEP) — this contains the details of all the government entities' proposed
expenditures in the coming year.
c. Budget of Expenditures and Sources of Financing (BESF) — this contains the estimated expenditures
accompanied by estimates of expected sources of financing.
d. Other documents aimed to provide further explanation of selected items in the NEP (e.g., details of key
programs and projects and staffing summary).
Relevant provision of law:

The President shall submit the proposed budget to the Congress within 30 days from the opening
of every regular session, (Art. Vll, Sec. 22. Philippine Constitution)

Illustration: Excerpts from President Budget Message
Excerpt 1
Fiscal Year 2017
Message of
President Rodrigo Roa Duterte to the
Seventeenth Congress of the Philippines on
the National Budget for Fiscal Year 2017
August I5, 2016

Ladies and Gentlemen of the
17 th Congress of the Philippines:
I have the honor to submit to you, through the President of the

Senate and the Speaker of the House of Representatives, the
Proposed National Budget for Fiscal Year (FY) 2017.
Excerpt 2:
Fiscal Year 2017
BUDGET PHILOSOPHY
Ladies and gentlemen, my commitment to implement real
change lies at the core of the P3.35 trillion proposed Budget
for FY2017.
This is my Administration’s first Budget. It is a Budget that

gives flesh and bone to the promise by which won as
President: to fight for social justice. It was designed to realize
change in the here and now.
This Budget is for the people and by the people.
In the last one and a half months since we assumed office, we designed this Budget around the following principles:

Budget Legislation
Government funds shall only be spent in pursuance of an appropriation made by law. Therefore, due process must be
undertaken to legalize the proposed budget.
4. House Deliberations --- Upon receipt of the President's Budget, the House of Representatives conducts
hearings to scrutinize the various agencies' respective proposed programs and expenditures. Thereafter, the
House of Representatives prepares the General Appropriations Bill (GAB).
5. Senate Deliberations- The Senate conducts its own deliberations on the GAB. These normally start after the
Senate receives the GAB from the House of Representatives. However, for expediency, hearings in the Senate
start even as Representatives deliberations are ongoing.
6. Bicameral Deliberations - After deliberations in both houses are finished, a committee called the Bicameral
Conference Committee is formed to harmonize any conflicts between the Representatives and Senate
versions of the GAB.
The harmonized GAB ('Bicam' version) is submitted back to both Houses for ratification. After
ratification, the final GAB is submitted to the President for enactment.
7. President's enactment - The President enacts the budget, which is now known as the General Appropriations
Act (CAA). Before enactment though, the President may exercise his veto power as conferred to him under the
Philippine Constitutions
.
Relevant provision of law:
When the proposed budget is not enacted before the fiscal year starts, the last year's GAA is
automatically reenacted. The last year's GAA shall be used in the current year until a new general
appropriations bill is passed by the Congress.
(Art. VI, Sec, 25(7), Philippine Constitution)
The Approved Budget
Approved Budget – is the expenditure authority and other decisions related to the anticipated revenue or receipts for the
budgetary period. The approved budget consists of the following:
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
*The unified Accounts Code Structure (UACS) refers to the standard system used in financial reporting of the
National Government.
Appropriation — is the authorization made by a legislative to allocate funds for purposes specified legislative similar
authority.
1. New General Appropriations — are annual authorizations fot incurring obligations during a specified budget year, as
listed in the GAA.
2. 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.
3 Supplemental Appropriations --- are additional appropriations authorized by law to augment the original appropiati01f
which proved to be insufficient for their intended purse due to economic, political or social conditions supported by
Certification of Availability of Funds from the BTr.
4. Automatic Appropriations - are the authorizations programmed annually Or for some other period prescribed by
law which do not require periodic action by Congress,
5.Unprogrammed Funds - are standby appropriations authorized by Congress in the annual GAA which may be availed
only when any of the following instances occur:
a. revenue collections exceed the original revenue targets in the Budget of Expenditures and Sources
of Financing (BESF) submitted by the President. to the Congress;
b. new revenues are collected or realized from sources not originally considered in the BESF; or
c. newly-approved loans for foreign-assisted projects are secured or when conditions are triggered for
other sources Of funds such as perfected loan agreements for foreign assisted projects.
(source: http://www.dbm.gov.ph/?page_id=7366)
6. Retained Income/Funds — collections which are authorized by law to be used directly by agencies concerned for
their operation or specific purposes. (http://www.dbm.gov.ph/w
content/uploads/BESF/BESF2016/GLOSSARY.pdt)
7. Revolving Funds - receipts derived from business-type activities of departments/agencies which are authorized
by law to be constituted as such and deposited in an authorized government depository bank. These *funds shall be
self-liquidating and all obligations and expenditures incurred by virtue of said business-type activity shall be charged
against said fund. (http://www.dbm.gov.ph/wp-content/up10ads/BESF/BESF2016/GLOSSARY.pdf)
8, Trust Receipts –Receipts by any government agency acting as trustee, agent or administrator for the
fulfilment of some obligations or conditions. (Adapted from the definition of "Trust Fund" in
http://www.dbm.gov.ph/wpcontent/up10ads/BESF/BESF2016/GLOSSARY.pdf)
Relevant provisions of law:
 A special appropriations bill shall specify the purpose for which it is intended, and shall be supported
by funds actually available as certified by the National Treasurer be raised by a -corresponding
revenue proposal therein. (Art. VI, Sec. 25(4), Philippine Constitution)

 No law shall be passed authorizing any appropriations; however, the President, the President
Senate, the Speaker of the House of Representatives, the Chief Justice of the Supreme Court, and
the Constitutional' Commissions may, by law, be augment any item in the general appropriations law
respective offices from savings in other items respective appropriations. (Art. VI, Sec. 25(5),
Constitution).
Budget Execution
This is the phase where government funds are spent:
8. Release guidelines and BEDs — The DBM issues guidelines the release and utilization of funds while the various
submit their Budget Execution Documents (BEDs). A summarizes an agency's fiscal year plans and performance
targets. It includes the following:
1. Physical and financial plan,

2. Monthly cash program,
3. Estimate of monthly income, and
4. List of obligations that are not yet due and demandable
The following are the major recipients of the budget:
1. National Government Agencies (NGAs) — include all agencies within the executive, legislative and judicial brand
government, e.g., commissions, departments, Land Bank of the Philippines, Social Security System, etc.
.
2. Local Government units (LGU’s) include (a) autonomous regions, (b) provinces and cities independent from a
province, (c) component cities (cities which are part of a province) and municipalities, and (d) barangays.
3. Government Owned and Controlled Corporations (GOCCs) corporations that are owned or controlled, directly or
indirectly, by the government and vested with functions relating to public needs.

The members of the Congress (Senators and Congressmen) and the Judiciary Branch are also recipients of
a portion of the budget.
1.The portion received by members of the Congress is referred to as the Priority Development Assistance
Fund (PDAF) a•k.a. "Pork Barrel." This is intended to fund priority development programs of the
government.
2, ,
2.The portion received by members of the Judiciary is referred to as the Judiciary Development Fund (JDF).
At least 80% of the fund is intended for the cost of living allowances of the members and personnel of the
Judiciary, the remainder, not exceeding 20%, is for the acquisition and maintenance of office equipment and
facilities. (PD NO. 1949)
In 2014, the Aquino Administration introduced the Disbursement Acceleration Program (DAP) which aims to
speed-up public spending. The DAP is not a fund but a mechanism of releasing funds, particularly from
savings and unprogrammed funds.
 Savings are available portions or balances of items under the General Appropriations Act (GAA) which
result from: a) the completion or finål discontinuance or abandonment of a program, activity, or project:
b) unpaid compensation for vacant or unfilled positions and leaves of absence without pay; or c) the
implementation of efficiency measures that enable agencies to deliver services at lower cost. Such
savings may then be used to augment funds for programs, activities, or projects which are included in
the GAA (i.e. nonexistent budget items cannot be funded).
 Unprogrammed funds (see previous definition).
Both the PDAF and the DAP received various criticisms from the public in 2013 and 2014, following the
Janet Lim-Napoles alleged pork scam. The PDAF and DAP was later on thought to have been abolished by
the Supreme Court. However, "The 2015 budget is still filled with pork barrel funds despite the Supreme
Court decision declaring the Disbursement Acceleration Program (DAP) and the Priority Development
Assistance Fund (PDAF) as unconstitutional, according to a budget watchdog," (Source; The Philippine Star,
December 21, 2014)
9. Allotment – the DBM formulates the Allotment Release Program (ARP) to set the limit for allotments releases during
the upcoming year. This is used as a control device to ensure that releases conform to the national budget. Alongside, is
a Cash Release Program (CRP), which sets the disbursement limits for the year; for each quarter and for each month.
 Allotment - is an authorization issued by the DBM 10 government agencies 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.
It is illegal for a government entity to incur obligations without having first received the "Allotment."
Moreover, the type and amount of obligations to be incurred must conform to those that are specified in the
“Allotment."
 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.

The following are the documents used in releasing allotments to government agencies:
I. General Appropriations Act Release Document (GAARD) -serves as the obligational authority for the
comprehensive release of budgetary items appropriated in the CAA, categorized as For Comprehensive Release.
2. Special Allotment Release Order (SARO) -- covers budgetary items under For Later Release (negative list) in
the entity's submitted Budget Execution Documents (BEDS), subject to compliance of required
documents/clearances. Releases Of allotments for Special Purpose Funds (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.
10. Incurrence of Obligations- government agencies incur obligations which will be paid by the government, e.g., entering
into contracts, hiring of personnel, purchase of supplies, etc.
11. Disbursement Authority — the DBM issues disbursement authority to the government agencies. This is the point
where government agencies obtain access to the government funds.
The following are the documents used in releasing disbursement authority to government agencies:
 Notice of Cash Allocation (NCA) — authority issued by the DBM to central, regional and provincial offices and
operating units to cover their cash requirements.
The NCA specifies the maximum amount of cash that can be withdrawn from a government servicing
bank in a certain period. The NCA is based on the agency's submitted Monthly Cash Program.
 Notice of Transfer of Allocation- authority issued by an agency's Central Office to its regional and operating
units to cover the latter's cash requirements.
 Non-Cash Availment Authority - 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.
 Cash Disbursement Ceiling authority issued by the DBM to agencies with foreign operations (e.g.,
Department of Foreign Affairs 'DEA') allowing them to use the income collected by their Foreign Service
Posts to cover their operating requirements.
Disbursements are most commonly made through checks that are chargeable against the account of the
Treasurer of the Philippines (i.e., Treasury Single Account). Checks issued under this scheme are called
"Modified Disbursement System (MDS) Checks. "
Other modes of disbursements include payments through cash, commercial check, bank transfer/bank
debit, or credit card.

Summary.
1 Appropriation authorization by a legislative body to allocate funds for specified use or
. purpose
2. .AlIotment authorization to agencies to incur obligations (i.e., obligational authority)
3. Obligation amount contracted by an authorized officer for which the government is held
liable.
4. Disbursement actual amount paid out of the budgeted amount,
Budget Accountability
This phase occurs concurrently with the Budget Execution phase. As the budget is being executed, it is regularly
monitored to determine the conformance Of actual results with planned targets.
12. Budget Accountability Reports- government agencies are required to submit the following accountability reports:
a. Monthly Report of Disbursements shows the disbursements of the entity during the month, classified according to
the type of disbursement authority. This report is submitted to the COA and DBM within 30 days after the end of
each month.
b. Quarterly Physical Report of Operation -- shows the agency's physical accomplishments in a given quarter vis-å-vis
its physical targets.
c. Statement of Appropriations, Allotments, Obligations, Disbursements and Balances -- shows the agency's
authorized appropriations, allotments received, obligations incurred, disbursements made and the balances of
unreleased appropriations, unobligated allotments, and unpaid obligations.
d. Summary of Appropriations, Allotments, Obligations, Disbursements and Balances by Object of Expenditures —
similar to 'c' above but provides details of expenditures (e.g., salaries and wages, traveling expenses, etc.).
e. List of Allotments and Sub-Allotments — shows the allotments received by the agency from the DBM and the sub-
allotments issued by the agency's Central Office or Regional Office to lower operating units.
f. Statement of Approved Budget, Utilizations, Disbursement’s and Balances - this report is

prepared by agencies that have authority to use their revenue. It shows the budgeted revenue, the
utilizations and disbursements thereof, and the unutilized amount.
g. Summary of Approved Budget, Utilizations, Disbursements and Balances by Object of Expenditures — similar to 'f'
above but provides details of expenditures.
h. Quarterly Report of Revenue and Other Receipts - shows the actual revenues and other receipts remitted to the
BTr and deposited in authorized government depository banks in a given quarter.
i.
 Reports 'b' to 'h' above are prepared on a quarterly basis and are submitted to the COA and DBM within 30
days after the end of each quarter.
i. Aging of Due and Demandable Obligations -- shows the names of creditors, the amounts owed to them, and the
number of days these obligations are outstanding. This report is submitted to the COA and DBM within 30 days
after the end of the year.

 A Consolidated Statement of Allotments, Obligations, and Balances per Summary of Appropriations (based
on reports 'c' and 'd' above) shall be submitted on or before February. 14 of the following year.
13. Performance reviews - The DBM and COA perform periodic reviews of the agencies' performance and budget
accountability and report to the President,
14. Audit - the COA audits the agencies.
 The budget together with other budget record%, provide information in preparing the Statement of
Comparison of Budget and Actual Amounts, which is one of the components of a complete set of financial
statements of a government entity. We will discuss this statement later,
Story; The Budget Cycle
l. Budget Preparation
Papa and Mama are leaving for a I-month trip so they asked you and your little sister to make pn estimate
of the money you will need while they are gone (Budget Ca//). You started your estimate by asking first Little
Sister of her needs (‘bottom-up' budgeting), Same time last year. Papa and Marna also went for a I-month
trip and they had you made a similar estimate, However, instead of giving them that old estimate, you
decided to make a new one in order to better reflect current circumstances ( 'zero-based' budgeting).
You defended your estimate with Mama (Budget hearings).

Mama submitted the estimate to Papa for approval
(Presentation to the Office of the President).
ll. Budget Legislation
Papa consulted Lolo (a retired Lawyer) to review your estimate (House Deliberations).
After reviewing the estimate, Lolo gave the estimate to Lola (a retired CPA) for further study (Senate
Deliberations).
Lolo and Lola had some disagreements, so they asked Umpong, your dog, to harmonize the conflicts
(Bicameral/Deliberations), After harmonizing the conflicts, Umpong submitted the "Bicarn" version of the
estimate back to both Lolo and Lola for ratification,
Lolo and Lola submitted the ratified estimate to Papa for enactment (President's enactment). Your
approved budget for the month is PIOO (Appropriation).
Ill. Budget Execution
Papa left the money to Uncle. Uncle gave you guidelines on how the money will be released to you, based
on your estimates of the timing of disbursements (Release guidelines and BEDS).

Uncle told you that you can now incur obligations up to a maximum of P8() (Allotment).
You then went to Aling Masing’s Store to purchase groceries good for I months worth P50, on credit
(Incurrence of Obligations),
Uncle gave you P25 cash to cover your cash disbursement needs 'for the 1 st week (Disbursement Authority
Notice of Cash Allocation). You gave Little Sister her share of P5 (Notice of Transfer or Allocation).
 Your disbursements in the 1st week were as follows:
 You: P5 installment payment to Aling Masing and P12 on Personal needs

 Little Sister: P5 on personal needs
Total disbursements in 1st week P22
IV. Budget Accountability
Your budget accountability reports after the 1st week will show the following information (Budget
Accountability Reports):
 Appropriation: PI00
 Allotment received P80
 Unreleased appropriation: (P100 - P80) = 20
 Obligations incurred: (P50 to Aling Masing + P12 on your personal needs + P5 on Little Sister's
personal needs) = P67
 Unobligated allotment: (P80 allotment - P67) = P13
 Disbursements: P22
 Unpaid Obligations:(P67 obligations incurred P22 disbursements) = P45 (payable to Aling Masing
 Unused NCA = (P25 NCA - P22 disbursements) = P3
Uncle periodically updates Papa and Mama regarding your budget execution through call and text
(Performance Review).
Papa and Mama will audit you when they return (Audit).
- The End
Notice that appropriations, allotments and disbursements authorities are systems of budgetary control. Instead of
releasing the allocated funds of P 100 to you all at once, it is released on a piecemeal basis, based on your estimate of
the timing of needs, (Budget Execution Documents BED’s). This is to prevent the incurrence of overdraft (i.e obligations
exceeding the appropriated funds).

Responsibility Accounting
To better evaluate the budget accountability of an entity government accounting adheres to the concept of responsibility
accounting.
Responsibility accounting is a system of providing cost and revenue information over which a manager has direct
control of This enables the evaluation of a manager’s performance based only on matters that are directly under his
control Therefore budget deviations can be readily attributed to the managers, accountable therefor.
Responsibility accounting requires the identification of responsibility centers and the distinction between controllable and
non-controllable costs.

 Responsibility center -- is a part, segment, unit or function of a government agency, headed by a manager,
who is accountable for a specified set of activities.
 Controllable costs — a cost is considered controllable at a given level of managerial responsibility if the
manager has the er to incur it within a given period of time.
 Non-controllable costs — are costs incurred indirectly and allocated to a responsibility level.
Except for some which derive most of their income from collection of taxes and fees, government agencies are basically
cost centers whose primary purpose is to render service to the public at the lowest possible cost.
Each of the managers of an agency that is a cost center is evaluated based on his ability to meet budgeted goals for
controllable costs. All costs are controllable by top management because of the high extent of its authority. Fewer costs
are controllable in lower management levels because of the decreased scope of authority.
Each government agency is assigned a responsibili ty center code as follows:


A.) Prea5 Module 1

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to your 1st Module

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College of Business and Accountancy Prepared by Yves A. Mortillero

After completing this module, you are expected to:

1. Group discussion during a synchronous meeting

OL & NOL Students:

College of Business and Accountancy Prepared by Yves A. Mortillero

Using your Learning Portfolio, answer the following questions:

Using the google classroom, please answer the assignment.

Disclaimer. DISCLOSURE STATEMENT

College of Business and Accountancy Prepared by Yves A. Mortillero

The objectives of government accounting are:

a. To produce information concerning past operations and present conditions;

b. To provide a basis for guidance for future operations;

College of Business and Accountancy Prepared by Yves A. Mortillero

Responsibility, Accountability and Liability over Government Funds and Property

Responsibility over Government Funds and Property

Accountability over Government Funds and Property

Liability over Government Funds and Property

College of Business and Accountancy Prepared by Yves A. Mortillero

The Unsung Heroes

The following offices are charged with government accounting responsibility:

Commission on Audit (Audit)

The Commission on Audit (COA)

Department of Budget and Management (DBM)

Bureau of Treasury (BTr)

College of Business and Accountancy Prepared by Yves A. Mortillero

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

College of Business and Accountancy Prepared by Yves A. Mortillero

College of Business and Accountancy Prepared by Yves A. Mortillero

Relevant provision of flaw:

The GAM for NGAs aims to update the following:

Basic Accounting and Budget reporting Principles

The financial records and reports of government entities shall

Code Fund clusters

College of Business and Accountancy Prepared by Yves A. Mortillero

Qualitative Characteristics of Financial Reporting

Trade-offs between Relevance and Reliability

College of Business and Accountancy Prepared by Yves A. Mortillero

Components of General Purpose Financial Statements

The complete set of general purpose financial statement consists of:

a. Statement of Financial Position;

Elements of the financial statements

Indicators of future economic benefits:

College of Business and Accountancy Prepared by Yves A. Mortillero

An asset is recognized when:

Probable inflow of future economic benefits:

a. Valuation method is free from material error or bias;

College of Business and Accountancy Prepared by Yves A. Mortillero

 Qualitative characteristics: Understandability, Relevance, Materiality, Timeliness,

 An item is recognized as asset if all of the following criteria are met:

College of Business and Accountancy Prepared by Yves A. Mortillero

1. Enumerate the steps in the budget process,

The National Budget

The Budget Cycle

The budget cycle has four phases, namely:

College of Business and Accountancy Prepared by Yves A. Mortillero

Incremental budgeting vs. Zero-based budgeting

 Uses a "roll-over" approach.  Uses a "back-to-zero" or "clean slate"

Public Transparency Reporting Project, January 11, 2011)

College of Business and Accountancy Prepared by Yves A. Mortillero

Relevant provision of law: