AEC 34

LECTURE
ACCOUNTING FOR GOVERNMENT AND NONPROFIT ORGANIZATIONS
UNIT TITLEDFD ● No accountable officer shall be relieved from liability
merely because he has acted under the direction of a
OVERVIEW OF GOVERNMENT ACCOUNTING superior officer unlawfully (unless otherwise he notified
the officer in writing that it is illegal)
GOVERNMENT ACCOUNTING ● Accountable officer shall immediately notify COA for any
loss of government funds from unforeseen events (30
DEFINITION days)

ACCOUNTING RESPONSIBILITY
● Process of analyzing, recording, classifying,
summarizing, and communicating all transactions
(receipt and disposition of government funds and
property and interpreting results)
● Process of producing information that is useful in making
economic decisions.
● Primarily budgetary accounting
● Also aims budget information in accordance with PPSAS
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OBJECTIVES

● Produce information concerning past operations and

present conditions
● Provide a basis for guidance for future operations
● Provide control of the acts of public bodies and officers
in the receipt, disposition and utilization of funds and
property
● Report on the financial position and the results of
operations of government agencies for the information of
all persons concerned

GREAT EMPHASIS ON:

● Sources and utilization of government funds COMMISSION ON AUDIT

o Sources (taxes, borrowing, grants, and other fees)
o Utilization (expenditures, programs, projects, etc.)
● Responsibility, accountability and liability of entities
entrusted with government funds and properties
RESPONSIBILITY, A CCOUNTABILITY, LIABILITY OVER
GOVERNMENT FUNDS AND PROPERTY
RESPONSIBILITY
● Government resources shall be utilized efficiently in
accordance with the law
● Share fiscal responsibility for those who are in authority
ACCOUNTABILITY
● Accountable officer shall be properly bonded (since
there should be a responsibility in safekeeping in
accordance with the law)
● Transfer should be properly documented in an invoice
and receipt (ex. Transfer of gov funds made only in
authorization of COA)
LIABILITY
● Personal liability of employee in an unlawful use of
government resources
● Accountable officer shall be liable due to unlawful use or
negligence in safekeeping gov resources
● Has exclusive authority to promulgate accounting and
auditing rules and regulations
● Keeps general accounts of government, supporting,
vouchers, and other documents
● Submit financial reports to the presidents and congress
DEPARTMENT OF BUDGET AND MANAGEMENT
● Responsible for the formulation and implementation of
the national budget
BUREAU OF TREASURY
● Cash custodian of the government
● Receive and keep national funds and manage and
control disbursements
● Maintain accounts of financial transactions of all national
government offices, agencies and instrumentalities
GOVERNMENT AGENCIES
● Any department, bureau or office of national
government, or any of its branches and
instrumentalities, or any political subdivision including
GOCC, or other self governing board or commission of
government
● Shall maintain accounting books and budget registries

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GOVERNMENT ACCOUNTING MANUAL FOR NATIONAL
GOVERNMENT AGENCIES
DEFINITION
● New government accounting system
● Promulgated primarily to harmonize the government
accounting standards with international accounting
standards
● The Philippine government incorporated Philippine
Public Sector Accounting Standards (PPSAS) in the
GAM for NGAs
● Promulgated by COA based on the authority of PH
constitution (Art. IX-D, Sec.2(2) Philippine Constitution)
COVERAGE
● Preparation of general purpose financial statements in
accordance with PPSAS and other financial reports
required by law
● Reporting budget, revenue, and expenditure in
accordance with law, rules and regulations
OBJECTIVES
● Aims to update standards, policies, guidelines and
procedures in accounting government funds and
property
● Aims to update coding structure and accounts
● Aims to update accounting books, registries, records,
forms, reports, and financial statements
OBJECTIVES
● PPSAS and relevant laws, rules, and regulations
● Accrual Basis of accounting
● Budget Basis (presentation of budget information in the
financial statements)
● Revised chart of accounts prescribed by COA
● Double entry bookkeeping
● Financial statements (based on accounting and
budgetary records
● Fund cluster accounting - types of funds being
accounted for (ex. Regular agency fund, foreign assisted
project fund, etc.)
QUALITATIVE CHARACTERISTICS OF FINANCIAL REPORTING
(TURRM FSN PCC)
CHARACTERISTICS
● Timeliness
o loss of relevance if there is undue delay
● Understandability
o Easy to comprehend
o Also users is expected to have reasonable
knowledge and have willingness to study
● Relevance
o Information must be timely and can assist
evaluating past, present, or future events.
● Reliability
o Free from material error and not bias (can be
depended by users)
● Materiality
o Material information if omitted or misstated can
influence decisions of users (Depends on nature
and size of item or error)
● Faithful Representation
o Must be presented in accordance with substance
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o Produced accurately and reflect the condition of a
business
● Substance over form
o Accounted for and presented in accordance with
their substance and economic reality and not
merely their legal form.
● Neutrality
o Free from bias
● Prudence
o Exercise a degree of caution when making
estimates
● Completeness
o Information should be complete within the bounds
of materiality and cost
● Comparability
o Information is comparable if it help users identify
similarities and differences (inter and intra
comparability)
GENERAL PURPOSE FINANCIAL STATEMENTS
● Statement of Financial Position
● Statement of Financial Performance
● Statement of Changes in Net Assets/Equity
● Statement of Cash flows
● Statement of Comparison of Budget and Actual
Amounts
● Notes to to Financial Statements
ELEMENTS OF THE FINANCIAL STATEMENTS
ASSETS
● Controlled by an entity as a result of past events, and
from which future economic benefits or service potential
are expected to flow the entity
● Recognition
o Future economic benefits are probable (greater
than 50%)
o Assets has a cost or value that can be measured
reliably
LIABILITIES
● Present obligations of the entity arising from past
events, the settlement of which is expected to result in
an outflow from the entity of resources embodying
economic benefits or service potential
EQUITY
● Residual interest in the assets of the entity after
deducting all its liabilities
REVENUE
● 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 (future economic
benefits that have been contributed to the entity by
external parties)
● Revenue funds: all funds derived from the income of any
agency of the government and available for
appropriation or expenditure in accordance with law
EXPENSES
● Decrease in economic benefits or service potential
during the reporting period in the form of outflows or
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consumption of assets or incurrence of liabilities that 2 - BUDGET HEARINGS

result in decrease in net asset/equity, other than those
relating to distribution to owners (future economic
benefits distributed by the entity to its owners; return on
investment or return of investment)
THE BUDGET PROCESS
NATIONAL BUDGET
● Conducted after the agencies submit their budget
proposal
● Budget proposal is defended by the agency and will be
then deliberated by the DBM (makes recommendation
and consolidates into the National Expenditure Program
and Budget of Expenditures and Sources of Financing)
● Budget proposal will then be submitted to the president

DEFINITION 3 - PRESENTATION TO THE OFFICE OF THE PRESIDENT

● Government’s estimate of the sources and uses of ● Proposed budget will be reviewed by president and the
government funds within a fiscal year cabinet members
● Basis for expenditures and is the government’s key ● When approved DBM finalizes and submits to the
instrument for promoting its socio-economic objectives congress (now referred to as president’s budget)
● The government funds should be in accordance with the ● President’s budget contains the following:
national budget that is duly approved by the legislation o President’s budget message - contains the
president’s explanation of the country’s fiscal policy
THE BUDGET CYCLE and budget priorities
o National Expenditure Program - contains details of
● Budget Preparation all government entitite’s proposed expenditures in
● Budget Legislation the coming year
● Budget Execution o Budget Expenditures and Sources of Financing -
● Budget Accountability contains the estimated expenditures accompanied
by estimates if expected sources of financing
BUDGET PREPARATION o Other Documents - provides further explanation of
selected items in the NEP
DEFINITION
BUDGET LEGISLATION
● Bottom up approach in the Philippines (several parties
participate in the budget preparation starting lowest to DEFINITION
the highest level)
● Due process undertaken to legalize proposed budget
Incremental Budgeting Zero-Based Budgeting
● Present budget is ● Created without regard to 4 - HOUSE DELIBERATION
formulated based on previous year (need to be
previous year justified) ● Conduct hearings to scrutinize the various agencies’
● “Roll-over” approach ● “Back to zero” or “clean respective proposed programs and expenditures
● Prone to abuse state” approach ● Prepares General Appropriations Bill
● Promotes efficient and
effective utilization of 5 - SENATE DELIBERATIONS
funds
● Senate own deliberations on GAB
1 - BUDGET CALL
6 - BICAMERAL DELIBERATION
● Contains next fiscal year’s target the agency’s budget
ceiling, and other guidelines in the completion and
● After deliberation of both houses, committee called the
submission of agency budget proposals.
Bicameral Conference Committee is formed to
● Starts when DBM issue budget call
harmonize any conflicts between the representatives
● Relevant terms:
and senate versions of the GAB
o Balance budget - prepared in such a way that
estimated revenues exceed estimated
expenditures. Revenues exceed actual
7 - PRESIDENT’S ENACTMENT
expenditures: surplus; expenditures exceed
revenues: deficit. ● President enacts the budget which is now known as
o Annual Budget - covers period of one year and General Appropriations Act
forms the basis for the annual appropriation ● President may exercise his veto power
o Special Budget - provides for items not adequately
covered or not included in the general appropriation APPROVED BUDGET
act
o Line Item Budget - focuses on specific expenditures ● expenditure authority derived from appropriation laws,
such as salaries and wages, travel expenses, government ordinances, and other decisions related to
freight, supplies, materials and equipment the anticipated revenue receipts for the budgetary period
o Performance Budget - a plan of activities to be ● Consist of:
undertaken, including their related costs, with the o New General Appropriation
emphasis on meeting targets and desired results. ▪ Annual authorizations for incurring obligations
o Obligations budget - focuses on expenditures
incurred in the current year which are to be paid during a specified budget year
either in the same year or in the following year o Continuing Appropriations

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▪ Authorizations to support obligations for a
specific purpose or project (multi
construction projects)
o Supplemental Appropriations
▪ Additional appropriations authorized by law to
augment the original appropriations which
proved to be insufficient for their intended
purpose
o Automatic Appropriations
▪ Authorizations programmed annually or for
some other period prescribed by law (do not
require periodic action by congress)
o Unprogrammed funds
▪ Standby appropriations authorized by congress
in the annual GAA
Availed only when:
▪ Revenue collections exceed the original
revenue targets in the Budget of Expenditures
and Sources of Financing submitted by the
President to the congress
▪ New revenues are collected or realized from
sources not originally considered in the BESF
▪ 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
o Retained Income/Funds
▪ Collections authorized by law to be used by
agencies concerned for their operation or
specific purposes
o Revolving funds
▪ Receipts derived fro business-type activities of
departments/agencies which are authorized by
law to be constituted as such and deposited in
an authorized government depository bank.
o Trust Receipts
▪ Receipts by any government agency acting as
trustee, agent or administrator for the fulfillment
of some obligations or conditions
BUDGET EXECUTION
DEFINITION
● Government funds are spent
8 - RELEASE GUIDELINES AND BEDS
● DBM issues guidelines on the release and utilization of
funds while various agencies submit their Budget
Execution Document (BEDs)
● BEDs include:
o Physical and Financial Plan
o Monthly cash program
o Estimate of monthly income
o List of obligations that are not yet due and
demandable
● Major recipients of budget:
o National Government Agencies
▪ Agencies within the executive, legislative, and
judicial branches of government
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o Local Government Units
year ▪ Autonomous regions, provinces and cities
independent from province
▪ Component cities
▪ Municipalities
▪ baranggay
● Government Owned and Controlled Corporations
o Controlled and owned directly or indirectly by the
government
9 - A LLOTMENT
● DBM formulate Allotment Release Program (ARP) to set
the limit for the allotment releases during the upcoming
year
● ARP is used as a control device to ensure that releases
conform to the national budget
● The allotment issued by the DBM is also referred as
Obligation Authority
● Incur obligations without allotment is illegal
● Documents used in Allotment
o General Appropriations Act Release Document
(GAARD)
o Special Allotment Release Order (SARO)
o General Allotment Release Order (GARO)
10 - INCURRENCE OF OBLIGATIONS
● Agencies incur obligations which is then paid by the
government
11 - DISBURSEMENT AUTHORITY
● Government agencies obtain access to government
funds
● DBM issues disbursement authority
● Documents used:
o Notice of Cash Allocation (NCA)
o Notice of Transfer Allocation
o Non-cash Availment Authority
o Cash Disbursement Ceiling
BUDGET ACCOUNTABILITY
DEFINITION
● Executed budget is regularly monitored to determine the
conformance of actual results with planned targets
12 - BUDGET ACCOUNTABILITY REPORTS
● Monthly Report of Disbursements
o shows the disbursements of the entity during the
month, classified according to the type of
disbursement authority
● Quarterly Physical Report of Operation
o Agency’s physical accomplishments in a given
quarter vis-a-vis its physical targets
● Statement of Appropriations, Allotments, Obligations,
Disbursements and Balances
o Authorized appropriations, allotments received,
obligations incurred, disbursements made and the
balances of unreleased appropriations, unobligated
allotments, and unpaid obligations
● Summary of Appropriations, Allotments, Obligations,
Disbursements and Balances by Object Expenditures
o Details of expenditures
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● List of Allotments and Sub-Allotments

o Allotments received by the agency from the DBM
and the Sub Allotments issued by the agency’s
central office or regional office to lowering operating
units
● Statement of Approved Budget, Utilizations,
Disbursements and Balances
o Prepared by the agencies that have authority to use
their revenue. (budgeted revenue, utilizations and
disbursements, and unutilized amounts)
● Summary of Approved Budget , Utilizations
Disbursements and Balances by object of expenditures
o Details of expenditures to ‘previous report’
● Quarterly Report Revenue and Other Receipts
o Actual revenues and other receipts remitted to the
BTr and deposited in authorized government
depository banks in a given quarter
● Aging of due and demandable obligations
o Names of creditors and amount owed to them.

13 - PERFORMANCE REVIEWS

● DBM and COA perform periodic reviews of the agency’s

performance and budget accountability and report to the
president

14 - A UDIT

● COA audits the agencies

RESPONSIBILITY ACCOUNTING

DEFINITION

● A system of providing cost and revenue information over

which a manager has direct control of
● Enables evaluation of a manager’s performance based
only on matters that are directly under his control
● Requires identification of responsibility centers and
distinction between controllable and non-controllable
costs
RESPONSIBILITY CENTER

● part, segment, unit or function of a government agency,

headed by a manager, who is accountable for a
specified set of activities

CONTROLLABLE COSTS

● considered controllable at a given level of managerial

responsibility if the manager has the power to incur it
within a given period of time

NON-CONTROLLABLE COSTS

● costs incurred indirectly and allocated to a responsibility

level

🌷 🌷
Verse of The Day
“Trust in the Lord with all your heart and lean not on your own
understanding; in all your ways acknowledge Him and He will make your
paths straight.”
Proverbs 3:5-6

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