GOVERNMENT ACCOUNTING

Even under the new accounting system, government accounting is defined, pursuant to Section 109 of
PD 1445. as one which “encompasses the process of analyzing, recording, classifying, summarizing and
communicating all transactions involving the receipt and disposition of government fund and property
and interpreting the result thereof»

Section 110, Presidential Decree 144S sets down the following objectives of government accounting:

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

2. To provide a basis for guidance for future operations;
3. To provide for control of the acts of public bodies and offices in the receipt, disposition and
utilization of funds and property; and
4. To report on the financial position and the results of operations of government agencies for the
information and guidance of all persons concerned.

Information of past operations and present conditions will facilitate the evaluation of the performance
of an agency from one period to another. The results of the evaluation may guide the manager on what
course of action to take as regards future operation, as well as come up with a proper analysis of the
funds needed for a project.

Public officers are accountable for the resources entrusted to them. The accounting data will show
whether or not the agency is achieving its mandates as well as its operational objectives. Moreover, the
financial reports will also show the extent of the agency's financial and non-financial resources, which
have useful lives. Evaluation of said information will enable the users to determine the "service
potential" of the Agency's resources, as well as give an indication when additional resources need to be
injected into the operation.

The accounting data will also show the obligations of the agency and how such obligations have been
incurred. The information should tell its users the sources of resources, which will meet these
obligations. The information should show an analysis of the inflow and outflow of resources, especially
of financial resources. To achieve its objectives, e.g., the adoption of a system that is in conformity with
international accounting standards, the Commission on Audit as a member of the International
Organization of Supreme Audit Institutions (INTOSAI) is encouraged to adopt relevant international
accounting standards.
PUBLIC SECTOR ACCOUNTING STANDARDS BOARD

In order to formulate and implement public sector accounting standards and establish linkages with
international bodies, professional organizations and academe on accounting related fields on financial
management, the Public Sector Accounting Standards Board (PSASB) was created in 2008 under COA
Resolution No. 2008-12 dated October 10, 2008. In developing standards of the Philippine Public Sector
Accounting Standards (PPSAS), the PSASB considers and make use of, among others, the existing laws,
financial reporting, accounting rules and regulations, and pronouncements issued by the International
Public Sector Accounting Standards Board (IPSASB).

The PSASB shall assist the commission in formulating and implementing Philippine Public Sector
Accounting Standards (PPSAS). The PPSAS shall apply to all National Government Agencies (NGAs), Local
Government Units (LGUs) and Government- Owned and/or Controlled Corporations (GOCCs) not
considered as Government Business Enterprises (GBEs), in which case, the Philippine Financial Reporting
Standards (PFRS) and relevant standards issued by the Financial Reporting Standards Council, Board of
Accountancy, and Professional Regulation Commission shall apply. In other words, GBE is covered by the
accounting standards issued by IFRS/PFRS but not IPSAS/PPSAS.

Government Business Enterprise (GBE) is an entity that has all the following characteristics:

1. An entity with the power to contract in its own name;

2. Has been assigned the financial and operational authority to carry on a business;
3. Sells goods and services, in the normal course of its business, to other entities at a profit or full
cost recovery;
4. Not reliant on continuing government funding to be a going concern (other than purchase of
outputs at arm's length); and
5. Controlled by a public sector entity.

The following are the processes and öther considerations in developing the Philippine Public Sector
Accounting Standards (PPSAS):

1. Applicability of IPSAS.

COA Resolution No. 2014-003 dated January 24, 2014 provides that “after a study and review of the
provisions of the International Public Sector Accounting Standards (IPSAS), the Public Sector Accounting
Standard Board (PSAcSB) recommended the adoption of the IPSAS, to be referred to as the Philippine
Public Sector Accounting Standards (PPSAS). The PPSAS, as aligned with the prevailing international
standards, provide quality accounting standards thereby enhancing the quality and uniformity in
financial reporting by Phillipine Public Sector entities, and ensuring accountability, transparency and
comparability of financial information with other public sector entities around the worid.”

2. Exposure draft of PPSAS.

The PSASB issues exposure drafts of all proposed PPSAS for comment by interested parties including
COA officials and auditors, agency finance personnel, oversight agencies, professional organizations,
academe and other stakeholders. The PSASB sets a reasonable time to allow interested parties to
consider and comment on its proposals. The PSASB evaluates all comments received on exposure drafts
and makes such modifications, where appropriate.

3. Fundamental issues.

Where an accounting principle or a significant element of a disclosure requirement contained in IPSAS is

considered to be in conflict with the Philippine laws, rules and regulations, this would be regarded as a
fundamental issue and the accounting principle or disclosure requirement may be changed.

4. Statutory authority

Where the international standard deviates from the Philippine regulatory or legislative environment,
Philippine application guidance shall be issued accordingly.

5. Disclosure requirements.

Disclosure requirements may be amended when the amendments are regarded as being significant for
improving fair presentation of the matter

6. PPSAS numbering.

The PPSAS is assigned the same number as the IPSAS to maintain the link. Where a PPSÄS is developed
and there is no IPSAS equivalent, the standard will be assigned a number in a series of PPSAS starting
with 101. When IPSASB subsequently issues the equivalent standard as an IPSAS, the 100 series PPSAS
will be withdrawn and reissued as a PPSAS with the IPSAS number. Standards of PPSAS have equal
authority regardless of the numbering used.

7. Financial reporting issues not dealt with by IPSAS.

Where issues related to financial reporting emerged, researches were done and a discussion document
prepared based on other relevant accounting standards not in conflict with Philippine laws.

8. Submission of draft to PSASB for consideration of the COA.

Where there are significant changes or unresolved issues associated with an exposure draft, the PSASB
may decide to re-expose a proposed PPSAS.
9. If considered appropriate, focus group discussions will be held to obtain further opinions on issues
identified by the exposure process.

ACCOUNTING RESPONSIBILITY

Accounting responsibility emanates from the Constitution, laws, policies, rules and regulations. The
Constitution of the Philippines, the fundamental law of the land, mandates the keeping of the general
accounts of the government, promulgation of accounting rules, and the submission of reports covering
the financial condition and operation of the government.

The offices charged with the accounting responsibility are the Commission on Audit (COA), the
Department of Budget and Management (DBM), the Bureau of Treasury (BTr), and the government
Agencies discharging the functions of government to enable it to attain its commitments to the Filipino
people.

COMMISSION ON AUDIT

The Commission on Audit (COA) keeps the general accounts of the government, promulgates accounting
rules and regulations, and submits to the President and Congress, within the time fixed by law (not later
than the last day of September each year - Section 41, PD 1445), an annual report of the government, its
subdivisions, agencies and instrumentalities, including government-owned or controlled corporations
(GSIS) (PhilHealth).

In the performance of its functions, as mandated by Article IX-D, Section 2 par. (2) of the 1987
Constitution of the Philippines, to wit; "The Commission on Audit shall have exclusive authority, subject
to the limitation 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." The Commission on Audit
revised the previous government accounting system.

Pursuant to the COA, DBM and DOF Joint Circular No. 2013-1 dated August 6, 2013, Unified Accounts
Code Structures (UACS), the consistency of account classification and coding structures with the Revised
Chart of Accounts shall be the responsibility of the COA. (UACS and the Revised Chart of Accounts will be
discussed in detail in the later chapter of this book.)

As mentioned in the preceding section, the Commission on Audit, pursuant to the 1987 Philippine
Constitution, Sec. 2(2), Art. IX-D, which vests the exclusive authority to promulgate accounting rules and
regulations, created the Public Sector Accounting Standards Board (PSASB) under CO Resolution 2008-12
dated October 10. 2008.

DEPARTMENT OF BUDGET AND MANAGEMENT

Pursuant to Section 2, Chapter 1, Title XVI1, Book IV of the Administrative Code of the Philippines (EO
292), "The Department of Budget and Management shall be responsible for the formulation and
implementation of the National Budget with the goal of attaining our national socio-economic plans and
objectives. The Department shall be responsible for the efficient and sound utilization of government
funds and revenues to effectively achieve the country's development objectives."

Furthermore, as provided by the Joint Circular No. 2013-1 dated August 6, 2013, Unified Accounts Code
Structures (UACS), the validation and assignment of new codes for funding source organization, sub-
object codes for expenditure items shall be the responsibility of the DBM. In addition, the validation and
assignment of new program, activity, project codes shall be decided jointly by the proponent agency and
DBM.

BUREAU OF TREASURY

The Bureau of Treasury (BTr) plays a pivotal role in the cash operations of the national government.
Accounting rules and regulations pertaining to cash operations, collections, remittances and
disbursements, including public borrowings, are issued by the Commission on Audit, jointly or with the
concurrence of the Department of Finance and the Department of Budget and Management.

Under the Revised Administrative Code, the Bureau of Treasury, as one of the operating bureaus of the
Department of Finance is authorized to:

1. Receive and keep national funds, manage and control the disbursements thereof; and

2. Maintain accounts of financial transactions of all national government offices, agencies and
instrumentalities.

Thus, the Bureau of Treasury shall control and monitor the Notice of Cash Allocation (NCA) released by
the Department of Budget and Management; as well as the bank transfers it makes in replenishing its
Modified Disbursement System (MDS) accounts.

According to the Joint Circular No. 2013-1 dated August 6, 2013, Unified Accounts Code Structures
(UACS), the consistency of accounts classification and coding standards with the Government Finance
Statistics (GFS) shall be the responsibility of Department of Finance - BTr. However, it should be noted
that GFS coding will generally not be shown to be part of the UACS; instead, GFS data will be obtained
from reference table inside the system that will map GFS function coding from MFO/PAP codes, as well
as GFS economic classification coding from object codes for non-financial assets, financial assets,
liabilities, revenues and expenses.
NATIONAL GOVERNMENT AGENCIES

Departments, bureaus, offices and other instrumentalities of the National Government, including the
Congress, the Judiciary, the Constitutional bodies, state colleges and universities, and other self-
contained institutions and hospitals are required by law to have accounting
units/divisions/departments, which are to be of the same level with other units/divisions/departments
in the agency and under the direct supervision of the Head of the Agency. Accounting personnel shall
(1.) maintain and keep current the accounts of the agency, (2.) provide advice on the financial condition
and status of the appropriations and allotments of the agency as its Head may require, and (3.) to
develop and conduct procedures designed to meet the needs of management. They shall perform the
aforesaid duties in accordance with existing laws, rules, regulations, procedures and comply with the
reporting requirements of the Commission on Audit, the Department of Finance and the Department of
Budget and Management. Failure to comply with these requirements is sufficient ground for dismissal
from the government service.

Under the new accounting system, the government agencies shall maintain the following registries:

1. Registry of Revenue and Other Receipts - Summary (RRORS)

The RROR shall be maintained by the4 Budget Division/Unit of NGA to monitor the revenue and other
receipts estimated/budgeted, collected and remitted/deposited.

This summary shall be kept by the Budget Division/Unit for each fund cluster maintained by the entity.

2. Registry of Revenue and Other Receipts - Regular Agency and Foreign Assisted Projects Fund (RROR-
RA&FAP)

This registry shall be maintained by the Budget Division/Unit of the entity for the following fund clusters:
1.) Regular Agency Fund; and, 2.) Foreign Assisted Project fund.

3. Registry of Revenue and Other Receipts - Special Account Locally Funded/Domestic Grants Fund
and Special Account Foreign Assisted/Foreign Grants Fund (RROR-SADFGF)

This registry shall be maintained by the Budget Division/Unit of the entity for the following fund clusters:
1.) Special Account – Locallly Funded/Domestic Grants Fund; and,

2.) Special Account Foreign Assisted/Foreign Grants Fund.

4. Registry of Revenue and Other Receipts - Internally Generated Funds (ON- Budgetary Funds -
Retained Income Funds)/Business Related Funds (RROR-IGF/BRF)

This registry shall be maintained by the Budget Division/Unit of the entity for the following fund clusters:
1.) Internally Generated Funds (Off- Budgetary - Retained Income Funds); and, 2.) Business Related
Funds.
5. Registry of Revenue and Other Receipts - Trust Receipts/Inter-agency Transferred Funds
(RROR-TR/IATF)

This registry shall be maintained by the Budget Division/Unit of the entity for the Trust Receipts/Inter-
agency Transferred Funds.

6. Registry of Appropriation and Allotments (RAPAL)

The RAPAL shall be maintained 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.

This registry shall be maintained by fund cluster by the Budget Division/Unit of each entity to ensure
that allotment releases are within the authorized appropriation. Separate registry shall be maintained
for prior year's appropriations.

7. Registry of Allotments, Obligations and Disbursements - Personnel Services (RAOD-PS)

The RAD shall be maintained to record allotments, obligations and disbursements. It shall show the
allotment received for the year, obligations incurred, and the actual disbursements made. The
incurrence of obligations shall be made through the issuance of Obligations Request and Status (ORS)
Every time an entry is made; the balance is determined to prevent incurrence of obligations in excess of
allotment and overdraft in disbursements against obligations incurred.

This registry shall be maintained by the Budget Division/Unit by Appropriation Act, fund cluster, by
Major Final Output (MFO) or Program/Activity/Project (PAP) for personnel services.

8. Registry of Allotments, Obligations and Disbursements - Maintenance and Other Operating

Expenses (RAOD-MOOE)

This registry shall be maintained by the Budget Division/Unit by Appropriation Act, fund cluster, by
Major Final Output (MO) or Program/Activity/Project (PAP) for maintenance and other operating
expenses.

9. Registry of Allotments, Obligations and Disbursements - Financial Expenses (RAOD-FE)

This registry shall be maintained by the Budget Division/Unit by Appropriation Act, fund cluster, by
Major Final Output (MFO) or Program/Activity/Project (PAP) for financial expenses.

10. Registry of Allotments, Obligations and Disbursements Capital Outlays (RAOD-CO)

This registry shall be maintained by the Budget Division/Unit by Appropriation Act, fund cluster, by
Major Final Output (MFO) or Program/Activity/Project (PAP) for capital outlays. (See Appendix 3D)

11. Registry of Budget, Utilization and Disbursements - Personnel Services (RBUD-PS)

The BUD shall be used to record the approved special budget and the corresponding utilizations and
disbursements charged to retained income authorized under RA 8292 for State Universities and Colleges
(SUCs) and other retained income collections of a NGA with similar authority. This registry shall be
maintained by the Budget Division/Unit by fund cluster, by Major Final Output (MFO) or Program
Activity/Project (PAP) for personnel services.

12. Registry of Budget, Utilization and Disbursements - Maintenance and Other Operating Expenses
(RBUD-MOOE)

This registry shall be maintained by the Budget Division/Unit by fund cluster, by Major Final Output
(MFO) or Program Activity/Project (PAP) for maintenance and other operating expenses.

13. Registry of Budget, Utilization and Disbursements (RBUD-FE) - Financial Expenses

This registry shall be maintained by the Budget Division/Unit by fund cluster, by Major Final Output'
(MFO) or Program Activity/Project (PAP) for financial expenses.

14. Registry of Budget, Utilization and Disbursements Capital Outlays (RBUD-CO)

This registry shall be maintained by the Budget Division/Unit by fund cluster, by Major Final Output
(MFO) or Program Activity/Project (PAP) for capital outlays.

15. Registry of Allotments and Notice of Cash Allocation (RANCA)

This registry shall be maintained by the Accounting Division/Unit to determine the amount of allotments
not covered by NCA and to monitor available NCA.

16. Registry of Allotments and Notice of Transfer of Allocation (RANTA)

This registry shall be maintained by the Accounting Division/Unit to determine the amount of allotments
not covered by NTA and to monitor available NTA.

BASIC ACCOUNTING AND BUDGET REPORTING PRINCIPLES

The Government Accounting Manual provides general provisions from existing laws, rules and
regulations; and basic standards/fundamental accounting principles for financial reporting by national
government agencies. It requires each government entity to recognize and present its financial
transactions and operations in conformity with the following:

1. Generally accepted government accounting principles in accordance with the PPSAS and pertinent
laws, rules and regulations.

CO Resolution No. 2014-003 dated January 24, 2014 prescribed the adoption of twenty five (25)
Philippine Public Sector Accounting Standards (PPSASs) effective January 1, 2014. These PPSASs were
based on International Public Sector Accounting Standards (IPSASs) which were published in the 2012
Handbook of International Public Sector Accounting Pronouncements of the IPSASB.

In adopting International Public Sector Accounting Standards (IPSAS), the PSASB attempts, wherever
possible, to maintain the accounting treatment and original contents of the IPSASs and its approved
amendments, unless there is a significant accounting issues that warrants a departure. In so doing, the
PPSAS is assigned the same number as the IPSAS to maintain the link.

In cases where a specific accounting issue is either not comprehensively dealt with in an existing IPSAS
or an IPSAS has not been developed by the IPSASB, a new standard of PPSAS shall be developed.
Accordingly, researches shall be conducted and a discussion document shall be prepared based on other
relevant accounting standards not in conflict with Philippine laws. As discussed in the preceding section,
where a new PPSAS is developed and there is no equivalent IPSAS, the standard will be assigned a
number in a series of PPSAS starting with 101. When IPSASB subsequently issues the equivalent
standard as an IPSAS, the 100 series PPSAS will be withdrawn and reissued as a PPSAS with the IPSAS
number.

2. Accrual basis of accounting in accordance with the PPSAS.

Accrual basis means a basis of accounting under which transactions and other events are recognized
when they occur, and not when cash or its equivalent is received or paid. Thus, the transaction 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.

3. Budget basis for presentation of budget information in the financial statements in accordance with
PPSAS 24.

IPSAS24, Presentation of Budget Information in Financial Statements, requires a comparison of budget

amounts and the actual amounts arising from execution of the budget to be included in the financial
statements of entities that are required to, or elect to, make publicly available their approved budgets,
and for which they are, therefore, held publicly accountable. It also requires disclosure of an explanation
of the reasons for material differences between the budget and actual amounts. Compliance with the
requirements of this standard will ensure that public sector entities discharge their accountability
obligations and enhance the transparency of their financial statements by demonstrating:

a) Compliance with the approved budget's for which they are held publicly accountable; and,

b) Where the budget's and the financial statements are prepared on the same basis, their financial
performance in achieving the budgeted results.

4. Revised Chart of Accounts prescribed by Commission on Audit.

The Commission on Audit as member of the International Organization of Supreme Audit Institutions
(INTOSAI) is encouraged to adopt relevant International Accounting Standards. The IPSASB of the
International Federation of Accountants which promulgates the IPSASs, acknowledges the right of
governments and national standards-setters to establish their respective accounting standards and
guidelines for financial reporting in their jurisdictions. And to provide new accounts for the adoption of
the PPSAS which were harmonized with the IPSAS to enhance the accountability and transparency of the
financial reports, and ensure compatibility of financial information, the COA recognizes the need to
revise the New Government Accounting System (NGAS) Chart of Accounts prescribed in COA Cir. No.
2004-008 dated September 20, 2004. The Commission also recognizes the need for uniform accounts to
be used in the national government accounting and budget systems to facilitate the preparation of
harmonized financial and budget accountability reports.

Accordingly, the COA revokes COA Cir. No. 2004-008 and the COA Circular No. 2013-002 dated January
30, 2013, Adoption of the Revised Chart of Accounts for National Government Agencies, is adopted.
Along this line, COA Circular No. 2014-003, dated April 15, 2014, Implementing Rules and Guidelines on
the Conversion from the Philippine Government Chart of Accounts under the NGAS to the Revised Chart
of Accounts for National Government Agencies; and COA Circular No 2015 - 007, dated October 22,
2015, Prescribing the Government Accounting Manual for Use of All National Government Agencies,
were considered

5. Double entry bookkeeping

Historically, one important breakthrough in the 13 th century is the introduction of double-entry

bookkeeping. The Messari (Treasurer's) accounts of Genoa, a city in Italy, is the oldest record of a
complete double- entry system that was discovered in 1340. It contains debits and credit journalized in a
bilateral form; thus, called double-entry system.

It is a system of bookkeeping where every journal entry to account requires a corresponding and
opposite entry to a different account. In the double-entry accounting system, two accounting entries are
required to record each accounting transactions. Recording of a debit amount to one or more accounts
and an equal credit amount to one or more accounts results in total debits being equal to total credits
for all accounts in the general ledger.

6. Financial statements based on accounting and budgetary records.

The objectives of general purpose financial reporting in the public sector should be to provide
information useful for decision making, and to demonstrate the accountability of the entity for the
resources entrusted to it, by:

a) Providing information about the sources, allocation, and uses of financial resources;

b) Providing information about how the entity financed its activities and met its cash requirements;

c) Providing information that is useful in evaluating the entity's ability to finance its activities and to
meet its liabilities and commitments;

d) Providing information about the financial condition of the entity and changes in it;
e) Providing aggregate information useful in evaluating the entity's performance in terms of service
costs, efficiency and accomplishments.

Financial reporting may also provide users with information:

a) Indicating whether resources were obtained and used in accordance with the legally adopted budget;
and

b) Indicating whether resources were obtained and used in accordance with legal and contractual
requirements, including financial limits established by appropriate legislative authorities.

7. Fund cluster accounting.

Fund cluster refers to an accounting entity for recording expenditures and revenues associated with a
specific activity for which accounting records are maintained and periodic financial reports are prepared.

COA Circular No. 2015-002 dated March 9, 2015, Supplementary guidelines on the preparation of
financial statements and other reports, the transitional provisions on the implementation of the PPSAS,
and other coding structures, provides that for the purpose of preparing the Annual Financial Report and
the Annual Audit Reports, all National Government Agencies (NGAs) shall submit to the COA Auditors
and the Government Accountancy Sector (GAS), COA, the detailed financial statements and trial
balances consolidated by the fund cluster as follows:

a) Regular Agency Fund

b) Foreign Assisted Projects Fund

c) Special Accounts - Locally Funded/Domestic Grants Fund

d) Special Accounts - Foreign Assisted/Foreign Grants Fund

e) Internally Generated Funds

f) Business Related Funds

g) Trust Receipt/Inter-agency Transferred Funds (IATF)

RESPONSIBILITY ACCOUNTING

Responsibility accounting is a system that relates the financial results to a responsibility center, which
provides access to cost and revenue information under the supervision of a manager having direct
responsibility for its performance. It is a system that measures the plans (by budget) and actions (by
actual results) of each responsibility center.

Responsibility center, on the other hand, is a part, segment, unit or function of a government agency,
headed by a manager, who is accountable for a specified set of activities. Except for some, which derive
most of their income from collection of taxes and fees, national government agencies are basically cost
centers, whose primary purpose is to render service to the public at the lowest possible cost. Cost
centers are established to provide each government agency's accessibility to cost information and to
facilitate cost monitoring at any given period. While the use of subsidiary ledgers is sufficient to control
cost, it requires considerable time to summarize the cost incurred by the agency for its different
programs, projects, activities and offices/divisions, hence, responsibility accounting shall be done only
under the computerized accounting system.

Responsibility accounting aims to: (1.) ensure that all costs and revenues are properly charged/credited
to the correct responsibility center so that deviations from the budget can be readily attributed to
managers accountable therefor; (2.) provide a basis for making decisions for future operations; and (3.)
facilitate review activities, monitoring the performance of each responsibility center and evaluation of
the effectiveness of agency's operations.

The following are the concepts of responsibility accounting:

1. Responsibility accounting involves accumulating and reporting data on revenues and costs on the
basis of the manager's action, who has authority to make the day-to-day decisions about the items;

2. Evaluation of a manager's, performance is based on the matters directly under his control;

3. Responsibility accounting can be used at every level of management in which the following conditions
exist:

a. Cost and revenues can be directly associated with the specific level of management responsibility;

b. Costs and revenues are controllable at the level of responsibility with which they are associated; and

C. Budget data can be developed for evaluating the manager's effectiveness in controlling the costs and
revenues.

4. The reporting of costs and revenues under responsibility accounting differs from budgeting in two
aspects:

a. A distinction is made between controllable and non-controllable costs.

A cost is considered controllable at a given level of managerial responsibility if that manager has the
power to incur it within a given period of time. It follows that all costs are controllable by top
management because of the broad range of its activity, and fewer costs are controllable as one moves
down to lower level of management responsibility because of the manager's decreasing authority.

2. Non-controllable costs are costs incurred indirectly and allocated to a responsibility level.

b. Performance reports either emphasize or include only items controllable by individual manager.
5. A responsibility reporting system involves the preparation of a report for each level of responsibility.
Responsibility reports usually compare actual costs with flexible budget data. The reports show only
controllable costs and no distinction is made between variable and fixed costs.

6. Evaluation of a manager's performance for cost centers is based on his ability to meet budgeted goals
for controllable costs.

In order to be effective in identifying the performance of a segment or unit of the agency under the
control and responsibility of the segment's manager, the coding structure has been formulated.
However, in order to provide a harmonized budgetary and accounting code classification that will
facilitate the efficient and accurate financial reporting, this coding structure was modified and repealed
lately by the Commission on Audit, Department of Budget and Management, and Department of
Finance through Joint Circular No. 2013-1 dated August 6, 2013: Unified Accounts Code Structure
(UACS). (This joint circular was later enhanced amending the Funding Source Code and MFO/PAP Code.)
For the organization code that will be useful for monitoring revenue and expenses, the Government
Accounting Manual assigned each National Government Agencies a responsibility center code defined as
organization code in the UACS Manual.