Chapter 1 - Overview of Government Accounting

Government Accounting and

Accounting for Non-Profit Organizations
By: Zeus Vernon B. Millan

Government accounting- encompasses the processes of analyzing, recording, classifying, summarizing

and communicating all transactions involving the receipt and disposition of government funds and
property, and interpreting the results thereof.” (State Audit Code of the Philippines, P.D. No. 1445, Sec.
109)

Government Accounting Objectives

❑ To produce information concerning past operations and present conditions;
❑ To provide a basis for guidance for future operations;
❑ To provide for control of the acts of public bodies and officers in the receipt, disposition and
utilization of funds and property; and
❑ To report on the financial position and the results of operations of government agencies for the
information of all persons concerned.

Government Accounting vs. Business Accounting

Compared to the accounting for business entities, government accounting places greater emphasis on
the following:
❑ Sources and utilization of government funds; and
❑ Responsibility, accountability and liability of entities entrusted with government funds and
properties.

Responsibility over Government Funds and Property

o Government resources must be utilized efficiently and effectively in accordance with the law.

o The head of a government agency is directly responsible in implementing this policy.

o All other personnel entrusted with the custody of government resources are responsible to the
head of the government agency, are accountable for the safeguarding thereof, and are liable
for any losses.

Accountability over Government Funds and Properties

o Government officer entrusted with the possession of government resources is responsible for
the safekeeping therefor in accordance with the law.

o Every accountable officer shall be properly bonded.

o Transfer of government funds from one officer to another shall, except as allowed by law, be
made only after the authorization of the COA. Transfer shall be properly documented in an
invoice and receipt
 Liability over Government Funds and Properties

➢ Unlawful use and losses resulting from the unlawful use or negligence in safekeeping of
government resources shall be the personal liability of the employee or accountable officer
found to be directly responsible therefor.

➢ An accountable officer shall immediately notify COA for any loss of government funds from
unforeseen events or force majeure within 30 days. Failure to do so will not relieve the officer of
liability.

➢ No accountable officer shall be relieved from liability merely because he has acted under the
direction of a superior officer in unlawfully utilizing the government resources entrusted to him,
unless before that act he has notified the superior officer, in writing, that the utilization is illegal.

➢ The superior officer shall be primarily liable while the accountable officer who fails to serve the
required notice shall be secondarily liable.

Accounting responsibility
The following offices are charged with government accounting responsibility:

1. Commission on Audit (COA)- Promulgate accounting and auditing rules, keep the general
accounts and submit financial reports to Congress/President

2. Department of Budget and Management (DBM)- Formulation & Implementation of the national
budget

3. Bureau of Treasury (BTr)- Cash custody and control of disbursements

4. Government agencies-Maintain accounting books and budget registries which are reconciled
with the cash records of the BTr and the budget records of the COA and DBM.

Bureau of Treasury (BTr)

• Each entity’s
accounting
books are
Each entity reconciles subject to audit
accounting books with by COA.
cash records of BTr • Each entity
reconciles Commission on
Government Agencies budget
Audit (COA)
registries with
budget records
Each entity reconciles of COA;
budget registries with • Each entity
budget records of DBM submits
financial reports
to COA for
Department of Budget and Management
consolidation
(DBM)
Financial Reporting

❑ Process of preparation, presentation and submission of general purpose financial statements

and other reports. The objective is to provide information about the entity that is useful to users
for accountability purposes and decision-making

The GAM for NGAs

The Government Accounting Manual for National Government Agencies (GAM for NGAs) is
promulgated by the COA under the authority conferred to it by the Philippine Constitution.

The GAM for NGAs was promulgated primarily to harmonize the government accounting standards with
the International Public Sector Accounting Standards (IPSAS). The IPSASs are based on the IFRSs.

Objectives of the GAM for NGAs

To update the following:

❑ Standards, policies, guidelines and procedures in accounting for government funds and
property;

❑ Coding structure and accounts; and

❑ Accounting books, registries, records, forms, reports and financial statements.

Basic Accounting and Budget reporting Principles

• Compliance with PPSAS and relevant laws, rules and regulations

• Accrual basis of accounting
• Budget basis for 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

Fund Clusters
Qualitative Characteristics of Financial Reporting

• Understandability
• Relevance
• Materiality
• Timeliness
• Reliability
• Faithful representation
• Substance over form
• Neutrality
• Prudence
• Completeness
• Comparability

Components of General Purpose Financial Statements

1. Statement of Financial Position;

2. Statement of Financial Performance;
3. Statement of Changes in Net Assets/Equity;
4. Statement of Cash Flows;
5. Statement of Comparison of Budget and Actual Amounts; and
6. Notes to the Financial Statements

Elements of Financial Statements

❑ Assets
❑ Liabilities
❑ Equity
❑ Revenue
❑ Expenses

Recognition of an Asset

An item is recognized as asset if it meets all of the following criteria:

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