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Chapter 1

Nature and Scope of the New Government Accounting System


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NEW GOVERNMENT ACCOUNTING SYSTEM (NGAS)

Recommended by COA under its authority stated in Section 2 (2) of 1987


Constitution Article IX-D to provide for the need of an accounting system
which will generate financial reports that reflect a more realistic picture of
government operations.
(2) The Commission 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,
extravagant,
or
unconscionable expenditures or uses of government funds and
properties.
NGAS introduced the basic policies and procedures, the new coding system,
the accounting systems, books, registries, records, forms, reports and
financial statements to be adopted by all national government agencies
effective January 1, 2002.
OBJECTIVE
NGAS was made in order to respond to the need for the following:
1. The adoption of a system that is in conformity with International
Accounting Standards;
2. Pursuit of eventual computerization, which will include responsibility
accounting, thereby ensuring the generation of various reports that are
useful to management, lawmakers and the general public;
3. Generation of relevant and periodic financial statements; and
4. Effective tool for managers and executives in effective and efficient
monitoring of Agency performance.
GOVERNMENT ACCOUNTING
Definition: Presidential Decree No. 1445 - The Government Auditing
Code of the Philippines Section 109.
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.

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Objectives: Presidential Decree No. 1445 - The Government Auditing
Code of the Philippines Section 110.
Government accounting shall aim to:
(1) produce information concerning past operations and present
conditions;
(2) provide a basis for guidance for future operations;
(3) provide for control of the acts of public bodies and officers in
the receipt, disposition and utilization of funds and property; and
(4) report on the financial position and the results of operations
of government agencies for the information of all persons
concerned.

PPSASB 4

IPSASB 3

PSASB 2

To achieve the objectives of New Government Accounting System, the


Commission on Audit as a member of the International Organization of
Supreme Audit Institutions1 (INTOSAI) is encouraged to adopt relevant
international
accounting
standards.
-provide
-basis for existing
-Government
frameworks and
laws, financial
Accounting
implement public
reporting,
Standards
sector accounting
accounting rules
-applies to all
standards and
and regulations,
NGAs5, LGUs 6 and
establish linkages
and
GOCCs7 not
with international
pronouncements
considered as
bodies,
(GBEs) 8
professional
organizations and
academe on
Financial
management
accounting related
fields
INTOSAI - operates as an umbrella organization for the external government audit
community that provides an institutionalized framework for supreme audit institutions to
promote development and transfer of knowledge, improve government auditing worldwide
and enhance professional capacities, standing and influence of members in their respective
countries.
2
PSASB Public Sector Accounting Standards Board
-was created under COA Resolution No. 2008-12 dated October 10, 2008.
3
IPSASB International Public Sector Accounting Standards Board
4
PPSASB Philippine Public Sector Accounting Standards Board
5
NGA National Government Agencies
6
LGU Local Government Units
7
GOCC Government owned and/or Controlled Corporations
8
GBE Government Business Enterprise applies PFRS and relevant standards issued by the
FRSC, BOA and PRC and 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 of full cost recovery;

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4. Not reliant on continuing government funding to be a going concern (other than


purchase of outputs at arms length); and
5. Controlled by a public sector entity.

Development of PPSAS
1. Applicability of IPSAS (Assessment)
Existing IPSAS were assessed to determine the applicability of the
provisions in the Philippines setting
2. Exposure draft (Post-Comment-Evaluate)
a. 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.
b. The PSASB sets a reasonable time to allow interested parties to
consider and comment on its proposals.
c. 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
PHILIPPINES 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 requirement
This may be amended when regarded as being significant for
improving fair presentation of the matter.
6. PPSAS numbering
a. Same number as IPSAS to maintain link
b. Series of PPSAS starting with 101 if there is no IPSAS equivalent.
c. PPSAS numbered in (b) will be withdrawn and reissued as PPSAS
with the IPSAS number if IPSASB subsequently issues equivalent
standard
*Standards of PPSAS have equal authority regardless of the
numbering used.
7. Financial reporting issues not dealt with by IPSAS

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Where issues related to financial reporting emerged, research were
done and a discussion document will be prepared based on other relevant
accounting standards not in conflict with Philippine laws.
8. Submission of draft to PSASB for consideration of 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 is 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.
1. Commision on Audit (COA);
2. Deparment of Budget and Management (DBM);
3. Bureau of Treasury (BTr); and
4. Government agencies discharging the functions of government to
enable it to attain its commitment to the Filipino people.
COMMISSION ON AUDIT
-

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, P 1445), and annual report of
the government, its subdivisions, agencies and instrumentalities,
including government owned or controlled corporations.

Unified Accounts Code Structures1 (UACS) Responsibility:


- Consistency of account classification and coding structures with the
Revised Chart of Accounts2
1

Provides framework for identifying, aggregating and reporting financial transactions in


budget preparation, execution, accounting and auditing. (Will be further discussed in
Chapter 3)
2
List of general ledger accounts consisting of real and nominal accounts. (Will be further
discussed in Chapter 4)

DEPARTMENT OF BUDGET AND MANAGEMENT

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Title XVII, Book IV of the Administrative Code of the Philippines (EO 292),
Chapter 1, Section 2. Mandate:
The Department 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 our countrys development objectives.

DBM is tasked to control and monitor appropriations and


allotments through the registries.
a. Registry of Appropriations and Allotments (RAPAL)
b. Registry of Special Purpose Fund Appropriation (RESPRFA)
c. Registry of Allotments and Notice of Cash Allocation
(RANCA)
Unified Accounts Code Structures1 (UACS) Responsibility
- Validation and assignment of new codes for funding source
organization, and sub-object codes for expenditure items.
- Validation and assignment of new program, activity and project
codes to be decided jointly with proponent agency
BEREAU OF TREASURY
-

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.

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

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1. Receive and keep national funds, manage and control the
disbursements thereof; and
2. Maintain accounts of financial transitions of all national government
offices, agencies and instrumentalities.
Under the new accounting system:
1. Maintain the Registry of NCA and Replenishment (RENREP) for
control and monitoring of NCA released by DBM.
2. Monitor bank transfers it makes in replenishing its MDS accounts.
Under Unified Accounts Code Structures:
- Responsible for the consistency of accounts classification and
coding standards with the Government Finance Statistics (GFS).
THE 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 selfcontained institutions and hospitals are required by law to have accounting
units/divisions/departments, which are to be of the same level wh 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
the management.
Responsibility under New Accounting System:
1. Agency shall journalize the Notice of Cash Allocation (NCA) it
receives, which in effect, identifies the share of agency in the
income of the national government;
2. Agencies will no longer journalize its appropriations and allotments
but maintain the following registries:
a. Registry of Allotments and Obligations Personnel Services
(RAOPS)
b. Registry of Allotments and Obligations Maintenance and
Other Operating Expenses (RAOMO)
c. Registry of Allotments and Obligations Capital Outlay
(RAOCO)
d. Registry of Allotments and Obligations Financial Expenses
(RAOFE)

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BASIC FEATURES AND POLICIES OF NGAS


a. Accrual Accounting. A modified accrual basis of accounting shall
be used. Under this method, all expenses shall be recognized when
incurred and reported in the financial statements in the period to
which they relate. Income shall be on accrual basis except for
transactions where accrual basis is impractical or when other
methods are required by law.
b. One Fund Concept. This system adopts the one fund concept and
that is the General Fund, which is generally available for all
functions of the government. Separate fund accounting shall be
done only when specifically required by law or by a donor agency or
when otherwise necessitated by circumstances subject to prior
approval of the Commission, in which case a Special Purpose
Fund may be created.
*Special Purpose Fund is a fund appropriated for purposes other
than those provided in the regular funds of government agencies,
such as:
i. Miscellaneous Personnel Fund used to cover personnel
benefits whih are not provide for in the regular budget of
the agency.
ii.
Organizational Adjustment Fund used to cover budgetary
requirements
of
a
newly
created
organization,
program/project/activity within an agency.
iii.
Calamity Fund used to cover relief, rehabilitation,
reconstruction and other services in connection with
calamities that may occur during the budget year.
c. Chart of Accounts and Account Codes. COA Circular No. 2013002 dated January 30, 2013 Adoption of the Revised Chart of
Accounts for National Government Agencies is adopted as the new
chart of accounts and coding structure with a three-digit account
numbering system.
Unified Accounts Code Structure (UACS) was jointly developed
by DBM, COA, DOF and BTr in Joint Circular No. 2013-1 dated August
6, 2013. To serve as the coding framework for the national
governments financial transactions in all phases of the budget
cycle starting FY 2014. Accordingly, all codes issued under the
National Standard Agency Coding System shall be used until
December 31, 2013 only.

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d. Books of Accounts. All national agencies shall maintain two sets
of books, namely:
Regular Agency (RA) Books. These shall be used to record
the receipt and utilization of Notice of Cash Allocation (NCA) and
other income/receipts which the agencies are authorized to use and
to deposit with Authorized Government Depository Bank (AGDB)
and the National Treasury. These shall consist of journals and
ledgers, as follows:

Journals

Cash
Receipts
Journal (CRJ)
Cash
Disbursements
Journal (CDJ)

Check
Disbursements
Journal (CkDJ)
General Journal (GJ)

Ledgers
General Ledger (GL)
Subsidiary Ledgers (SL) for:

Cash

Receivables

Inventories

Investments

Property, Plant
and
Equipment

Construction in Progress
Liabilities
Income
Expenses

National Government (NG) Books. These shall be


used to record income which the agencies are not authorized to use
and are required to be remitted to the National Treasury. These shall
consist of:

Cash Journal (CJ)

General Ledger (GL)


General Journal (GJ)

Subsidiary Ledger (SL)

With the implementation of the computerized agency


accounting system, only the General Journal shall be used together
with the ledgers by both books.

e. Financial Statements. The following


prepared:

Balance Sheet

Statement of Government Equity

statements

shall

be

Chapter 1
Nature and Scope of the New Government Accounting System

NEW

OLD

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Statement of Income and Expenses

Statement of Cash Flows

Presentation of a Comparison of Budget and Actual Amounts

Notes to Financial Statements shall accompany the


above statements.

f. Two-Money Column Trial Balance. The two - money column trial


balance showing the account balances shall be used.

Four-money
Two-money

column listings
column
g. Allotment
*Debit Balance
*very simple
and
*Debit Total
*Users other than
Obligation.
accountants can
*Credit Balance
Obligation
easily
*Credit Total
accounting is
understand
modified
to
simplify
procedures in the incurrence and liquidation of obligations and the
recording of the budgetary accounts (allotments and obligations
incurred and liquidated). Separate registries shall be maintained to
control the allotments and obligations for each of the four classes of
allotments, namely:

Registry of Allotments and Obligations - Capital Outlay


(RAOCO)
Registry of Allotments and Obligations - Maintenance and
Other Operating Expenses (RAOMO)
Registry of Allotments and Obligations - Personal Services
(RAOPS)
Registry of Allotments and Obligations- Financial Expenses
(RAOFE).

h. Notice of Cash Allocation (NCA). The receipt of NCA by the


agency shall be recorded in the books as debit to account CashNational Treasury, Modified Disbursement System (MDS) and credit
to account Subsidy Income from National Government.

i. Financial Expenses. Financial expenses such as bank charges,


interest expenses, commitment charges and other related expenses
shall be separately classified from Maintenance and Other
Operating Expenses (MOOE).

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j. Perpetual Inventory of Supplies and Materials. Supplies and


materials purchased for inventory purpose shall be recorded using
the perpetual inventory system.

Regular purchases shall be coursed thru the inventory


account and issuances thereof shall be recorded as they take place
except those purchased out of Petty Cash Fund which shall be
charged directly to the appropriate expense accounts.

k. Valuation of Inventory. Cost of ending inventory of supplies and


materials shall be computed using the moving average method. The
accounting unit shall be responsible in computing the cost of
inventory on a regular basis.

l. Maintenance of Supplies and Property, Plant and Equipment


Ledger Cards. For appropriate check and balance, the Accounting
Units of agencies, as well as the Property Offices, shall maintain
Supplies Ledger Cards/Stock Cards by stock number and Property,
Plant and Equipment Ledger Cards/Property Cards by category of
property, plant and equipment, respectively.

m. Construction of Assets. For assets under construction, the


Construction Period Theory shall be applied for costing purposes.
Bonus paid to the contractor for completing the work ahead of time
shall be added to the total cost of the project. Liquidated damages
charged and paid for by the contractor shall be deducted from the
total cost of the project. Any related expenses incurred during the
construction of the project, such as taxes, interest, license fees,
permit fees, clearance fee, etc. shall be capitalized, and those
incurred after the construction shall form part of operating cost.

n. Registry of Public Infrastructures/Registry of Reforestation


Projects. For agencies that construct public infrastructures, such
as roads, bridges, waterways, railways, plaza, monuments, etc., and
invest on reforestation projects, a Registry of Public Infrastructures
(RPI)/Registry of Reforestation Projects (RRP) shall be maintained for
each category of infrastructures/reforestation projects. Examples
are:

Registry of Public Infrastructures - Bridges (RPIB)


Registry of Public Infrastructures - Roads (RPIR)
Registry of Public Infrastructures - Parks (RPIP)
Registry of Reforestation Projects (RRP)

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A Summary of Public Infrastructures/Reforestation


Projects shall be prepared and included in the Notes to Financial
Statements.

o. Depreciation. The straight-line method of depreciation shall be


used. Depreciation shall start on the second month after purchase
of the property, plant and equipment, and a residual value
equivalent to ten percent of the purchase cost shall be set-up.
Public infrastructures/reforestation projects as well as serviceable
assets that are no longer being used shall not be charged any
depreciation. (See Annex A for List of Estimated useful life of PPE)

p. Reclassification of Assets. Serviceable assets no longer being


used shall be reclassified to Other Assets account and shall not
be subject to depreciation.

q. Allowance for Doubtful Accounts. An Allowance for Doubtful


Accounts shall be set up for estimated uncollectible trade
receivables to allow for their fair valuation.

r. Elimination of Contingent Accounts. Contingent accounts shall


no longer be used. All financial transactions shall be recorded using
the appropriate accounts. Cash shortages and disallowed payments,
which become final and executory, shall be recorded under
receivable accounts
Due From Officers and Employees or
Receivables-Disallowances/ Charges, as the case may be.

s. Recognition of Liability. Liability shall be recognized at the time


goods and services are accepted or rendered and supplier/creditor
bills are received.

t. Interest Accrual. Whenever practical and appropriate, interest


income and/or expense shall be accrued and recognized in the
books of accounts.

u. Accounting for Borrowings and Loans. All borrowings and loans


incurred shall be recorded to the appropriate liability accounts.

3.u.1 Loans Payable Domestic used to record long-term


indebtedness (in cash or in kind) from domestic creditors
evidenced by a contract or an agreement.
3.u.2 Loans Payable Foreign used to record long-term
indebtedness (in cash or in kind) from foreign governments
or international financial institutions evidenced by a
contract or an agreement.

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v. Elimination of corollary and negative journal entries. The use


of corollary and negative journal entries shall be stopped.
Acquisition/Disposition of assets shall be debited/credited to the
appropriate asset accounts. If an error is committed, a correcting
entry to adjust the original entry shall be prepared.

w. Petty Cash Fund. The Petty Cash Fund shall be maintained under
the imprest system. As such, all replenishments shall be directly
charged to the expense account and at all times, the Petty Cash
Fund shall be equal to the total cash on hand and the unreplenished
expenses. The Petty Cash Fund shall not be used to purchase
regular inventory/items for stock.


x. Foreign Currency Adjustment. Cash deposits in foreign currency
and outstanding foreign loans shall be computed at the exchange
rate prescribed by the Bangko Sentral ng Pilipinas at balance sheet
date. The total cash deposits and foreign loans payable shall be
adjusted at the end of each month and any gain or loss on foreign
exchange shall be recognized. The subsidiary ledger for foreign
currency obligations shall reflect the appropriate foreign currency in
which the loan is payable. The liability shall be expressed both in
the foreign and local currency.

Annex A

TABLE OF ESTIMATED USEFUL LIFE OF


PROPERTY, PLANT AND EQUIPMENT

Property, Plant and Equipment

Land Improvements

Land Improvements

Runways/taxiways

Railways

Electrification, Power and


Energy Structures
Buildings those that are
predominantly

Wood

Mixed

Concrete

Estimated
Useful
Property, Plant and
Life
Equipment
(in years)

10
20
40

10

10
20
30

Leasehold Improvements (Note 1)

Land
10

Building

Wood
10
Mixed
20
Concrete
30

Office, Equipment, Furniture and

Fixtures

Office Equipment
5

Furniture and Fixtures


10

IT Equipment - Hardware
5

Library Books
5

Machineries and Equipment

Machineries
10

Agricultural, Fishery and


10
Forestry

Estimated
Useful Life
(in years)

Airport Equipment
Communication Equipment
Construction and Heavy
Equipment
Firefighting Equipment and
Accessories
Hospital Equipment
Medical, Dental and
Laboratory Equipment
Military and Police
Equipment

Sports Equipment
Technical and Scientific
Equipment
Other Machineries and
Equipment

Transportation Equipment

Motor Vehicles

Trains

Aircraft and Aircraft Ground


Equipment

Watercrafts

Other Transportation
Equipment
Other Property, Plant and
Equipment

10
10
10
7
10
10
10

10
10
10

7
10
10
10
10

Note 1 - The estimated useful life shall depend on the


length of the lease. It shall be the period of the lease or the estimated
useful life of the assets, as given, whichever is shorter.