OVERVIEW OF

GOVERNMENT
ACCOUNTING
Learning Objectives:

01 02 03 04 05
Differentiate State the Describe briefly the State the basic State the
government government entities GAM for NGAs principles used in recognition criteria
accounting from the charged with Government for assets
accounting from accounting Accounting
business entities responsibility
 • Government Accounting –
encompasses the processes of
analyzing, recording,
What is classifying, summarizing and
communicating all transactions
Government involving the receipt and
disposition of government
Accounting? funds and property, and
interpreting the results thereof.
(Sec. 109, Presidential Decree (P.D.) No. 1445)
 Government accounting shall aim to :
• produce information concerning past
operations and present conditions;
Objectives of • provide a basis for guidance for future
operations;
government • provide for control of the acts of public
bodies and officers in the receipt,
accounting disposition and utilization of funds and
property; and
• report on the financial position and the
results of operations of government
agencies for the information of all persons
concerned.
(Sec. 110, Presidential Decree (P.D.) No. 1445)
Like the accounting for
business entities,
government accounting is
also a process of
producing information
that is useful in making
economic decisions.
Government Sources and Utilization of
Accounting Government Funds
places
greater Responsibility, Accountability
emphasis on and Liability of entities
the following: entrusted with government
funds and properties.
 Responsibility, Accountability
and Liability over Government
Funds and Property
Responsibility over Government Funds and Property

• It is the declared policy of the State that all resources of the government shall be managed,
expended or utilized in accordance with laws and regulations, and safeguarded against loss or
wastage through illegal or improper disposition, with a view to ensuring efficiency, economy and
effectiveness in the operations of government. The responsibility to take care that such policy is
faithfully adhered to rests directly with the chief or head of the government agency concerned. (Sec. 2,
P.D. No. 1445)

• Fiscal responsibility shall, to the greatest extent, be shared by all those exercising authority over the
financial affairs, transactions, and operations of the government agency. (Sec. 4(4), P.D. No. 1445)
• The head of any agency of the government is immediately and primarily responsible for all
government funds and property pertaining to his agency. Persons entrusted with the possession or
custody of the funds or property under the agency head shall be immediately responsible to him,
without prejudice to the liability of either party to the government. (Sec. 102, P.D. No. 1445)
 • Every officer of any government agency whose duties permit or require the

Accountability possession or custody of government funds or property shall be

accountable therefor and for the safekeeping thereof in conformity with
law. Every Accountable Officer(AO) shall be properly bonded in accordance
over with law. (Sec. 101, P.D. No. 1445; Section 50, Chapter 9, Subtitle B, Book V, Executive Order (E.O.) No. 292)

Government • Transfer of government funds from one officer to another shall, except as
allowed by law or regulation, be made only upon prior direction or
authorization of the Commission or its representative. (Sec. 75, P.D. No. 1445)
Funds and • When government funds or property are transferred from one AO to
Property another, or from an outgoing officer to his successor, it shall be done upon
properly itemized invoice and receipt which shall invariably support the
clearance to be issued to the relieved or outgoing officer, subject to
regulations of the Commission. (Sec. 77, P.D. No. 1445)
• Expenditures of government funds or uses of government
property in violation of law or regulations shall be a personal
liability of the official or employee found to be directly
responsible therefor. (Sec. 103, P.D. No. 1445)
• 2. Every officer accountable for government funds shall be Liability over
liable for all losses resulting from the unlawful deposit, use,
or application thereof and for all losses attributable to Government
negligence in the keeping of the funds. (Sec. 105(2), P.D. No. 1445)
• 3. No AO shall be relieved from liability by reason of his
Funds and
having acted under the direction of a superior officer in
paying out, applying, or disposing of the funds or property
Property
with which he is chargeable, unless prior to that act, he
notified the superior officer in writing of the illegality of the
payment, application, or disposition. The officer directing
any illegal payment or disposition of the funds or property
shall be primarily liable for the loss, while the AO who fails
to serve the required notice shall be secondarily liable. (Sec. 106,
P.D. No. 1445)
• When a loss of government funds or property occurs
while they are in transit or the loss is caused by fire,
theft, or other casualty or force majeure, the officer
accountable therefor or having custody thereof shall
immediately notify the Commission or the auditor
Liability over
concerned and, within 30 days or such longer period as
the Commission or auditor may in the particular case
Government
allow, shall present his application for relief, with the
available supporting evidence. Whenever warranted by
Funds and
the evidence, credit for the loss shall be allowed. An
officer who fails to comply with this requirement shall Property
not be relieved of liability or allowed credit for any loss
in the settlement of his accounts. (Sec. 73, P.D. No. 1445)
 Government resources must be

Main utilized efficiently and effectively in

accordance with the law.
Government Officials are
Concept responsible in implementing this
policy, are accountable for the
government resources in their
custody and are liable for any loss.
 Accounting
Responsibility
Accounting
Responsibility

• 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 a
direct responsibility for its
performance. It is a system that
measures the plans (by budgets)
and actions (by actual results) of
each responsibility center.
 a. 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 therefore
Objectives: b. Provide a basis for making decisions for
the future operations
c. Facilitate review of activities,
monitoring the performance of each
responsibility center and evaluation of
the effectiveness of the agency’s
operations
 • Commission on Audit (COA)
Offices • Department of Budget and Management
charged with (DBM)
• Bureau of the Treasury (BTR)
accounting • Government Agencies discharging the
functions of Government to enable it to
responsibility attain its commitments to the people.
are as follows:
 The Commission on Audit (COA) keeps the
Commission general accounts of the Government,
promulgates accounting and auditing rules
on Audit and regulations, and submits to the President
(COA) and Congress,
DBM shall be responsible for Department of
the formulation and the
implementation of the Budget and
National Budget with the goal
of attaining our national Management
socio-economic plans and
objectives. (DBM)
 the Bureau of Treasury functions under
DOF and is the cash custodian of the
government.
Bureau of
Treasury the Bureau of Treasury, as one of the
(BTr) operating bureaus of the Department
of Finance is authorized to:
• Receive and keep the national funds, manage
and control the disbursements thereof; and
• Maintain accounts of financial transactions of all
national government offices, agencies and
instrumentalities.
 - any department, bureau or office of the
Government Agencies national government, or any of its branches
discharging the and instrumentalities, or any political
subdivision, as well as any
functions of the governmentowned or controlled
government to enable corporation, including its subsidiaries, or
it to attain the other self-governing board or commission
of the government
commitments to the
- required by law to have accounting
Filipino people. units/divisions/departments
Financial
Reporting
System of
National
Government
Entity- refers to a government agency, department or operating/field unit
Financial Reporting- is the process of preparation, presentation and
submission of general purpose financial statements and other reports. The
objective of financial reporting is to provide information about the entity that
is useful to users for accountability purposes and decision-making.
The The GAM for NGAs was promulgated primarily to harmonize
the government accounting standards with international
Government accounting standards particularly the International Public
Sector Accounting Standards (IPSAS). The IPSAS are based on
the International Financial Reporting Standards (IFRS).
Accounting
Manual for The Philippine Government has adopted the IPSAS though
the Philippine Public Sector Accounting Standards (PPSAS).
The provisions of the PPSAS are incorporated in the GAM for
National NGAs.

Government
Agencies(GAM The GAM for NGAs is promulgated by the COA.

for NGAs)
The GAM for NGAs provides the basic
concepts to be used in:

1 2
Preparing general purpose financial Reporting of budget, revenue and
statement in accordance with the expenditure in accordance with
PPSAS and other financial reports laws, rules and regulations.
as may be required by laws, rules
and regulations.
Basic Government Accounting and Budget Reporting Principles (Sec. 6 of GAM Vol. 1)

Each entity shall recognize and present its financial transactions and operations conformably to the following:

1. generally accepted
3. budget basis for
government accounting
2. accrual basis of presentation of budget 4. Revised Chart of
principles in accordance
accounting in accordance information in the financial Accounts prescribed by
with the PPSAS and
with the PPSAS; statements(FSs) in COA;
pertinent laws, rules and
accordance with PPSAS 24;
regulations;

6. financial statements
5. double entry
based on accounting and 7. fund cluster accounting.
bookkeeping;
budgetary records; and

24
 Code Description

01 Regular Agency Fund

Fund Cluster
02 Foreign Assisted Project Fund
Accounting
03 Special Accounts – Locally Funded/Domestic Grants Fund

04 Special Accounts – Foreign Assisted/Foreign Grants Fund

The Books of Accounts shall
be maintained by Fund
clusters as enumerated.
05 Internally Generated Funds

06 Business Related Funds

07 Trust Receipts

25
Qualitative Characteristics of Financial Reporting

Understandability - information is understandable when users might

reasonably be expected to comprehend its meaning. For this purpose,
users are assumed to have a reasonable knowledge of the entity’s
activities and the environment in which it operates, and to be willing to
study the information. Information about complex matters should not
be excluded from the FSs merely on the grounds that it may be too
difficult for certain users to understand.
Qualitative Characteristics of Financial Reporting

Relevance - information is relevant to users if it can be used to assist in

evaluating past, present or future events or in confirming or correcting,
past evaluations. In order to be relevant, information must also be
timely.
Materiality - the relevance of information is affected by its nature and
materiality. Information is material if its omission or misstatement could
influence the decisions of users or assessments made on the basis of
the FSs. Materiality depends on the nature or size of the item or error
judged in the particular circumstances of its omission or misstatement.
Qualitative Characteristics of Financial Reporting

Timeliness - the usefulness of FSs is impaired if they are not made

available to users within a reasonable period after the reporting date.
An entity should be in a position to issue its FSs within six months of the
reporting date. Ongoing factors such as the complexity of an entity’s
operations are not sufficient reason for failing to report on a timely
basis. More specific deadlines are dealt with by legislation and
regulations in many jurisdictions.
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.
Qualitative Characteristics of Financial Reporting

Faithful representation – 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
Substance over 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 form. The substance of transactions or other
events is not always consistent with their legal form.
Neutrality - information is neutral if it is free from bias. FSs are not neutral if
the information they contain has been selected or presented in a manner
designed to influence the making of a decision or judgment in order to achieve
a predetermined result or outcome.
Qualitative Characteristics of Financial Reporting

Prudence - is the inclusion of a degree of caution in the exercise of the

judgments needed in making the estimates required under conditions of
uncertainty, such that assets or revenue are not overstated and
liabilities or expenses are not understated. However, the exercise of
prudence does not allow, for example, 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 FSs would not be neutral and, therefore, not have the
quality of reliability.
Qualitative Characteristics of Financial Reporting

Completeness - the information in FSs should be complete within the bounds

of materiality and cost.
Comparability - information in FSs 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 FSs of different
entities and comparison of the FSs of the same entity over periods of time. An
important implication of the characteristic of comparability is that users need
to be informed of the policies employed in the preparation of FSs, changes to
those policies and the effects of those changes. Because users wish to
compare the performance of an entity over time, it is important that FSs show
corresponding information for preceding periods. (PPSAS 1).
 Components of
General Purpose
Financial Statements
• Statement of Financial Position (SFP);
• Statement of Financial Performance
(SFPer);
• Statement of Changes in Net Assets/Equity
(SCNA/E);
• Statement of Cash Flows (SCF);
• Statement of Comparison of Budget and
Actual Amount (SCBAA); and
• Notes to the Financial Statements,
comprising a summary of significant
accounting policies and other explanatory
notes
Elements of Assets Liabilities Equity
the
Financial
Statement
Revenue Expenses
Key 01 02 03
Features of the benefits must
be controlled by the
entity;
the benefits must
have arisen from a
past event; and
future economic
benefits or service
potential must be
expected to flow to

Assets the entity

 • the ability of an entity to benefit from the
asset and to deny or regulate the access of
The following others to that benefit.

are indicators • an entity can, depending on the nature of the

asset, exchange it, use it to provide goods or
of control of services, exact a price for others’ use of it, use
it to settle liabilities, hold it, or perhaps even
distribute it to owners
the benefits • possession or ownership of an object or right
by the entity: would normally be synonymous with control
over the future economic benefits embodied
in the right or object
The following are indicators of past
event:

the specification of a a transaction or event

past event differentiates giving rise to control of
assets from intentions to the future economic
acquire assets, which are benefits must have
not to be recognized. occurred.
 • distinguishable from the source of the benefit
i.e. the particular physical resource or legal
right;

The following • does not imply that assets necessarily

generate cash flows, the benefits can also be
in the form of ‘service potential’;
are indicators • in determining whether a resource or right
of future needs to be accounted for as an asset, the
potential to contribute to the objectives of the
economic entity should be the prime consideration;
• capacity to contribute to
benefits: activities/objectives/programs; and
• the fact that an asset cannot be sold does not
preclude it from providing future economic
benefits.
Recognition of an Asset

it is probable that the

the asset has a cost or
future economic
value that can be
benefits will flow to
measured reliably
the entity; and
The following are indicators of probable
inflow of future economic benefits:

THE CHANCE OF BENEFITS ARISING IS BENEFITS CAN BE EXPECTED ON THE

MORE LIKELY RATHER THAN LESS LIKELY BASIS OF AVAILABLE EVIDENCE OR
(E.G. GREATER THAN 50%). LOGIC.
The following are
indicators of valuation method is free from
material error or bias.
reliable
measurement: faithful representation of the asset’s
benefits.

reliable information will, without bias

or undue error, faithfully represent
those transactions and events
QUESTIONS?

• FB Chat – Joy Barrameda Margallo

• Email –[email protected]