Provisions, Basic Standards and Policies = NU LAGUNA

Accounting for
Government and Non-
profit Organization

Course Material No. 1:

General Provisions,
Basic Standards and
Policies

Marion Ian M. Malabanan, CPA

 2 COST FUNDAMENTALS AND COST CONCEPTS • NU LAGUNA

General Provisions,
Basic Standards and
Policies 1
LEARNING OUTCOMES

Here’s what I will teach you in this course material:

LESSON OUTLINE 1. Concepts of Government Accounting

 Government Accounting 2. Functions of Public Sector Accounting Standards Board

3. Identification of the different offices with the Accounting Responsibility
 Government Accounting
4. Maintenance of various registries
Manual
5. Basic Accounting and Budget Reporting Principles
 Public Sector Accounting
6. Objectives of Responsibility Accounting
Standards Board

 Government Business
Enterprise
RESOURCES NEEDED

For this lesson, you would need the following resources:

 Accounting Responsibility

 Commission on Audit  Government Accounting by Angelito R. Punzalan

 Department of Budget and  Wiley Not-for-Profit GAAP 2016: Interpretation and Application of
Management Generally Accepted Accounting

 Bureau of Treasury

 National Government Agencies

 Provisions, Basic Standards and Policies = NU LAGUNA

TABLE OF CONTENTS

Accountant’s Word Hunt

Pretest

Before you start, try answering the following Provisions, Basic Standards
questions. and Policies

1. Define Government Accounting.

2. Enumerate the objectives of creating the Public Sector 12 Test Yourself

Accounting Standards Board.

3. Explain the processes of developing the Philippine Public

Sector Accounting Standards. 15 References

4. What are the government offices primarily charged with

the accounting responsibility?

5. Enumerate the registries of the National Government

Agencies as provided by the Government Accounting
Manual.

6. Enumerate the objectives of Government Accounting.

7. What are the basic accounting and budget reporting

principles under the Government Accounting Manual?

8. What are Fund Cluster Accounting.

9. How would the general purpose financial reporting the

public sector provide useful information for decision
making and demonstrate the accountability of the
government entity?

10, Enumerate the concept of responsibility accounting.

 Provisions, Basic Standards and Policies = NU LAGUNA

4
General
Provisions, Basic
Standards and
Policies
The lesson covers the general
provisions from existing laws, rules
and regulations; and the basic
standards/fundamental accounting
principles for financial reporting by
national government agencies, as
provided by the Government
Accounting Manual in accordance
with the Philippine Public Sector
Accounting Standards and other
pertinent laws, rules and regulations.

Accountant’s Word Hunt

Find accounting words as much as you can. You can choose any
letters inside the box but you can only use it once. The student who
has the most points will have special reward. Write your answer on
the right side of the paper.

G O V E R N M E N T T G

U A N N A I C I U N T G
F I G A C C S A L N I G

P U B L I C S E C T O R

A C C O U N T I N G T R

V K R J Y B D C N V N S

F I E E D D I E O C T L

R A S M A C E R I A L M

D V N R H A A E O I X B

C O M M I S S I O N O N

A U D I T V O S T T T N

A C C O U N T I N G A E

S A E E S R S G E S T H

1| P a g e
Provisions, Basic Standards and Policies = NU LAGUNA

General Provisions, Basic Standards and Policies

Hello Class. How is your day? I hope your fine. Today, we shall be discussing about the General

Provisions, Basic Standards and Policies in Accounting for Government,

In order to harmonize the existing accounting standards with the international accounting standards,

Commission on Audit (COA), as a member of the International Organization of Supreme Audit

Institutions (INTOSAI), through its authority under Article IX-D, Sec. 2, par. 2 of the 1987 Philippine

Constitution, prescribed the Government Accounting Manual (GAM) for National Government Agencies

(NGAs)

What is the Government Accounting Manual?

It presents the basic accounting policies and principles in accordance with the Philippine Public Sector

Accounting Standards (PPSAS). It aims to update the following:

 standards, policies and guidelines and procedures in accounting for government funds and

property

 coding structure and accounts

 accounting books, registries, records, forms, reports and financial statements.

It shall be used by all National Government Agencies (NGAs) in the preparation of the general purpose

financial statements in accordance with PPSAS and other reports required by laws, rules and

regulations and reporting of budget, revenue and expenditure in accordance with laws, rules and

regulations

Any Questions so far? You may ask me what is Government Accounting?

Government Accounting is 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.
Objectives of Government Accounting are as follows:

2|P a g e
Provisions, Basic Standards and Policies = NU LAGUNA

 To produce information concerning past operations and present conditions

 To provide the control of the acts of public bodies and offices in the receipt, disposition and
utilization funds and property
 To report on the financial position and the results of operations of government agencies for the
information and guidance of all persons concerned.
In order to formulate and implement public sector accounting standards and establish linkages with
International bodies, professional organizations and academe on accounting related files on financial
management, the Public Sector Accounting Standards Board (PSASB) was created in 2008 under COA
Resolution No. 2008-12 dated October 10, 2008.
What is the Public Sector Accounting Standards Board (PSASB)?
In developing standards, the PSASB considers and make use of existing laws, financial reporting,
accounting rules and regulations and pronouncements issued by the International Public Sector
Accounting Standards Board.
The following are the functions of PSASB:
 It shall assist the commission in formulating implementing Philippine Public Sector Accounting
Standards (PPSAS)
 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 Enterprise (GBEs)
Now, because the PSASB are tasked in formulating the PSAS, what are the processes and other
considerations implemented in developing the Public Section Accounting Standards (PPSAS)
 Applicability of IPSAS
Existing IPSAS were assessed to determine the applicability of the provisions in the Philippine
setting as bases in the development of PPSAS
 Exposure draft of PPSAS
PSASB issues exposure drafts of all proposed PPSAS for comment by interested parties including
COA officials and auditors, agency finance personnel, oversight agencies, professional
organization, academe and other stakeholders.
 Fundamental issue
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

3|P a g e
Provisions, Basic Standards and Policies = NU LAGUNA

changed.
 Statutory authority
Where the international standard deviates from the Philippine regulatory or legislative
environment, Philippine application guidance shall be issued accordingly.
 Disclosure requirements
Disclosure requirements may be amended when the amendments are regarded as being significant
for improving fair presentation of the matter
 PPSAS number
The PPSAS is assigned the same number as the IPSAS to maintain the link. Where a PPSAS is
developed and there is no IPSAS equivalent, the standard will be assigned a number in a series of
PPSAS starting with 101
 Financial reporting issues not dealt with by IPSAS
Where issued 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
 Submission of draft to PSASB for consideration of the COA
Where there are significant changes or unresolved issued associated with an exposure draft, the
PSASB, may decide to re-expose a proposed PPSAS
Let us now discuss about Government Business Enterprise (GBE). What is a GBE?
An entity that as all the following characteristics
 An entity with the power to contract in its own name
 Has been assigned the financial and operations authority to carry on a business
 Sells goods and services, in the normal course of its business, to other entities at a profit or full
cost recovery
 Not reliant on continuing government funding to be a going concern
 Controlled by a public sector entity
An integral part of Government Accounting is Accounting Responsibility. How do you understand
about Accounting Responsibility?
The Constitution of the Philippines 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.
Offices charged with the accounting responsibility are:

4|P a g e
Provisions, Basic Standards and Policies = NU LAGUNA

 Commission on Audit (COA)

 Department of Budget and Management (DBM) to
 Bureau of Treasury (BTr)
 Government agencies discharging the functions of government to enable it attain its
commitments to the Filipino people
Let’s talk about the functions of each office individually.
Commission on Audit
 Keeps the general accounts of the government
 Promulgates accounting rules and regulations
 Submits to the President and Congress, within the time fixed by law, an annual report of the
government, its subdivisions, agencies and instrumentalities, including government-owned or
controlled corporations.
Department of Budget and Management
 Responsible for the formulation and implementation of the National Budget with the goal of
attaining our national socio-economic plans and objectives.
 Responsible for the efficient and sound utilization of government funds and revenues to
effectively achieve the country’s development objectives.
 Validation and assignment of new codes for funding source organization and sub-object codes for
expenditure items
Bureau of Treasury
 Plays a pivotal role in the cash operations of the national government
 Authorize to receive and keep national funds, manage and control the disbursements
 Maintain accounts of financial transactions of all national government offices, agencies and
instrumentalities
 Control and monitor the Notice of Cash Allocation released by the DBM, as well as the bank
transfers it makes in replenishing its Modified Disbursement System (MDS)
National Government Agencies
 Departments, bureaus, offices and other instrumentalities of the National Government, including
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 in the agency and under the direct supervision of the Head of the Agency
 Accounting personnel shall:

5|P a g e
Provisions, Basic Standards and Policies = NU LAGUNA

 Maintain and keep current the accounts of the agency

 Provide advice on the financial condition and status of the appropriations and allotments
of the agency as its Head may require
 Develop and conduct procedures designed to meet the needs of management
Under the new accounting system, the government agencies shall maintain the following registries:
 Registry of Revenue and Other Receipts – Summary (RRORS)
This shall be maintained by the Budget Division/Unit of NGA to monitor revenue and other
receipts estimated/budgeted, collected and remitted/deposited.
 Registry of Revenue and Other Receipts – Regular Agency and Foreign Assisted Projects Fund
(RROR-RA&FAP)
This shall be maintained by Budget Division/Unit of the entity for the following fund clusters:
Regular Agency Fund and Foreign Assisted Project Fund.
 Registry of Revenue and Other Receipts – Special Account Locally Funded/Domestic Grants Fund
and Special Account Foreign Assisted/Foreign Grants Fund (RROR-SADFGF)
This shall be maintained by the Budget Division/Unit of entity for the following fund clusters:
Special account – Locally Funded/Domestic Grants Fund and Special account – Foreign
Assisted/Foreign Grants Fund
 Registry of Revenue and Other Receipts – Internally Generated Funds (Off-Budgetary Funds –
Retained Income Funds)/Business Related Funds (RROR-IGF/BRF)
This shall be maintained by Budget Division/Unit of the entity for the following fund clusters:
Internally Generated Funds (Off-Budgetary – Retained Income Funds) and Business Related
funds.
 Registry of Revenue and Other Receipts – Trust Receipts/Inter-agency Transferred Funds (RROR-
TR/IATF)
This shall be maintained by the Budget Division/Unit of entity for the Trust Receipts/Inter-Agency
Transferred Funds
 Registry of Appropriation and Allotments (RAPAL)
 This 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.
 It shall be maintained by the fund cluster by the Budget Division/Unit of each entity to
ensure that allotment releases are within the authorized appropriation.

6|P a g e
Provisions, Basic Standards and Policies = NU LAGUNA

 Registry of Allotments, Obligations and Disbursements – Personnel Services (RAOD-PS)

 This 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
 It 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
 Registry of Allotments, Obligations and Disbursements – Capital Outlays (RAOD-CO)
It 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
 Registry of Budgets, Utilization and Disbursements –Personnel Services (RBUD-PS)
 RBUD shall be used to record the approved special budget and the corresponding
utilizations and disbursements charged to retained income authorized under RA8292 for
Statement Universities and Colleges (SUCs) and other retained income collections of NGA
 It 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
 Registry of Budgets, Utilization and Disbursements –Maintenance and Other Operating Expenses
(RBUD-MOOE)
It shall be maintained by the Budget Division/Unit by Appropriation Act, fund cluster, by Major
Final Output (MFO) or Program/Activity/Project (PAP) for maintenance and other operating
expenses
 Registry of Budgets, Utilization and Disbursements –Financial Expenses (RBUD-FE)
It 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
 Registry of Budgets, Utilization and Disbursements –Capital Outlays (RBUD-CE)
It 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
 Registry of Allotments and Notice of Cash Allocation (RANCA)
It shall be maintained by the ACCOUNTING Division/Unit to determine the amount of allotments
not covered by NCA and to monitor available NCA
 Registry of Allotments and Notice of Transfer Allocation (RANTA)
It shall be maintained by the ACCOUNTING Division/Unit to determine the amount of allotments
not covered by NTA and to monitor available NTA

7|P a g e
Provisions, Basic Standards and Policies = NU LAGUNA

At this point, let us talk about the basic accounting and budget reporting principles.
It 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:
 Generally accepted government accounting principles in accordance with the PPSAS and
pertinent laws, rules and regulations.
 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.
 Budget basis for presentation of budget information in the financial statements in accordance
with PPSAS 24
PPSAS 24 - Presentation of Budget Information in Financial Statements requires 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 budget/s, and for which they are, therefore, held publicly accountable. It also requires
disclosure of an explanation of the reasons for material 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 statement by
demonstrating:
 Compliance with the approved budget/s for which they are held publicly accountable
 Where the budget/s and the financial statements are prepared on the same basis, their
financial performance in achieving the budgeted results.
 Revised Chart of Accounts prescribed by COA
 COA as member of the International Organization of Audit Institutions ( INTOSAI) is
encouraged to adopt relevant International Accounting Standards
 IPSASB of the International Federation of Accounts which promulgates the IPSASs,
acknowledges the right of government and national standards-setters to establish their
respective accounting standards and guidelines for financial reporting in their jurisdictions.
 COA recognizes the need to revise the New Government Accounting System (NGAS) Chart of
Accounts to promote harmony with the accounts of IPSAS, to enhance the accountability and

8|P a g e
Provisions, Basic Standards and Policies = NU LAGUNA

transparency of the financial reports and to ensure compatibility of financial information.

 COA as member of the International Organization of Audit Institutions ( INTOSAI) is
encouraged to adopt relevant International Accounting Standards
 IPSASB of the International Federation of Accounts which promulgates the IPSASs,
acknowledges the right of government and national standards-setters to establish their
respective accounting standards and guidelines for financial reporting in their jurisdictions.
 COA recognizes the need to revise the New Government Accounting System (NGAS) Chart of
Accounts to promote harmony with the accounts of IPSAS, to enhance the accountability
and transparency of the financial reports and to ensure compatibility of financial information
 Double Entry Bookkeeping
A system of bookkeeping where every journal entry to account requires a corresponding and
opposite entry to a different account.
 Financial statements based on accounting and budgetary records
The objective of general purpose financial reporting in the public sector should be to provide
information useful for decision making and demonstrate the accountability of the entity for the
resources entrusted to it by
 Providing information about the sources, allocation and uses of financial resources
 Providing information about how the entity financed its activities and met its cash
requirements
 Providing information that is useful in evaluating the entity’s ability to finance its activities
and to meet its liabilities and commitments.
 Providing information about the financial conditions of the entity and changes in it
 Providing aggregate information useful in evaluating the entity’s performance in terms of
service costs, efficiency and accomplishments
 Fund Cluster Accounting
 Refers to an accounting entity for recording expenditures and revenues with a specific
activity for which accounting records and maintained and periodic financial reports are
prepared
 All NGAs will submit to the COA Auditors and Government Accountancy Sector the detailed
financial statements and trial balances consolidated by the fund cluster, as follows:
- Regular agency fund
- Foreign assisted projects fund

9|P a g e
 Provisions, Basic Standards and Policies = NU LAGUNA

- Special accounts – Locally Funded/Domestic Grants Fund

- Special accounts – Foreign Assisted/Foreign Grants Fund
- Internally generated funds
- Business related funds
- Trust receipt/inter-agency transferred funds (IATF)
Our last topic is about Responsibility Accounting. What is Responsibility Accounting?
It is a system that relates the financial results to a responsibility center which provided access to cost
and revenue information under the supervision of a manager having direct responsibility for its
performance. A system that measures the plans (by budget) and actions (by actual results) of each
responsibility center.
Responsibility accounting aims to:
 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
 Provide a basis for making decisions for future operations
 Facilitate review activities, monitoring the performance of each responsibility center and evaluation of
the effectiveness of agency’s operations
It 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. Evaluation of a manager’s
performance is based on the matters directly under his control. Responsibility accounting can be used at
every level of management in which the following conditions exist:
 Costs and revenues can be directly associated with the specific level of management responsibility
 Costs and revenues are controllable at the level of responsibility with which they are associated
 Budget data can be developed for evaluating the manager’s effectiveness in controlling the costs and
revenues
The reporting of costs and revenues under responsibility accounting differs from budgeting in two aspects:
 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.
- Non-controllable costs are costs incurred indirectly and allocated to a responsibility level.
Performance reports either emphasize or include only items controllable by individual manager. A
responsibility reporting system involves the preparation of a report for each level of responsibility.
Responsibility reports compare actual costs with flexible budget data. The report show only controllable

10 | P a g e
 Provisions, Basic Standards and Policies = NU LAGUNA

costs and no distinction is made between variable and fixed costs.

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

Do you understand, class?

11 | P a g e
General Provisions, Basic Standards and Policies • NU LAGUNA

Choose the best answer for the following Questions.

Test yourself
1. It refers to an accounting entity for recording expenditures and revenue associated with a
specific activity for which accounting records are maintained and periodic reports are
prepared.
a. Financial accounting and reporting
b. Public sector accounting and reporting
c. Fund cluster accounting
d. Responsibility accounting

2. DBM, DAF, BrT and COA are collectively responsible for the Unified Accounts Code
Structure. Who is responsible for the consistency of account classification and coding
standards with Government Finance Statistics?
a. Department of Budget and Management
b. Department of Treasury – Bureau of Treasury
c. Commission of Audit
d. All of them are responsible

3. The Philippine Public Sector Accounting Standards (PPSAS) shall be applied to the
following, except:
a. National Government Agencies
b. Government Business Enterprises
c. Local Government Units
d. Government-Owned and/or Controlled Corporations

4. Its function is to assist the Commission on Audit in formulating and implementing

Philippine Public Sector Accounting Standards
a. Board of Accountancy
b. Philippine Institute of Certified Public Accountants
c. Public Sector Accounting Standards Board
d. Philippine Accounting Standards Committee

5. This is an authorization issued by the Department of Budget and Management to

government agencies to withdraw cash from the National Treasury through the issuance
of Modified Disbursement System checks or other authorized mode of disbursements
a. Allotment
b. MDS Checks
c. Notice of Cash Allocation
d. Appropriation

12 | P a g e
General Provisions, Basic Standards and Policies • NU LAGUNA

6. DBM, DAF, BrT and COA are collectively responsible for the Unified Accounts Code Structure.
Who is responsible for the validation and assignment of new codes for funding source,
organization, sub-object codes for expenditures items?
a. Department of Budget and Management
b. Department of Finance
c. Bureau of Treasury
d. Commission of Audit

7. It is the process of analyzing, recording, classifying, summarizing and communicating all

transactions involving the receipt and disposition of government funds and property and
interpreting the results thereof.
a. Government auditing
b. Government budgeting
c. Government accounting
d. National government

8. Which is not charged with the government accounting responsibility?

a. Commission on Audit
b. Department of Budget and Management
c. National Government Agencies
d. Legislative Department

9. What is the role of the Bureau of Treasury in relation to government accounting responsibility?
a. To receive and keep national funds and manage or control disbursements thereof
b. To design, prepare and approve the accounting systems of government agencies
c. To keep the general accounts of the national government
d. To prepare the annual financial report of the national government, its instrumentalities and
government-owned or controlled corporations.

10. DBM, DAF, BrT and COA are collectively responsible for the Unified Accounts Code
Structure. Who is responsible for the consistency of account classification and coding
standards with the Revised Chart of Accounts?
a. Department of Budget and Management
b. Department of Finance
c. Bureau of Treasury
d. Commission of Audit

11. Which is the legal basis of the Commission on Audit in promulgating accounting and auditing
rules and regulations?
a. PD 1445
b. Constitution of the Republic of the Philippines
c. COA Circular No. 2002-003
d. PD 1445 and the Constitution of the Republic of the Philippines

13 | P a g e
12. The books of original entry shall be used to record, in time sequence, financial transactions
and information presented in duly certified and approved accounting documents. What is
the basis in recording the financial transactions in the journals?
a. Journal Entry Voucher
b. Journal of Checks Issued
c. Journal and Analysis of Obligations
d. Journal of Bills Rendered

13. This registry shall be maintained by fund cluster by the Budget Division/Unit of each
government entity to ensure that allotment releases are within the authorized
appropriation.
a. Registry of Allotment and Notice of Allocation
b. Registry of Appropriation and Allotments
c. Registry of Budget, Utilization and Disbursements
d. Registry of Allotments, Obligations and Disbursements

14. This registry shall be maintained by Appropriation Act, by Fund Cluster, by Major Fund
Output or Program/Activity/Project for personnel services.
a. Registry of Allotments, Obligations and Disbursements – Personnel Services
b. Registry of Budget, Utilizations and Disbursements – Personnel Services
c. Registry of Allotments and Notice of Transfer of Allocations
d. Registry of Revenue and Other Receipts

15. It is a system of bookkeeping where every journal entry to account requires a

corresponding and opposite entry to a different account.
a. Accrual basis of accounting
b. Double entry bookkeeping
c. Budgeting report
d. Going concern

14 | P a g e
 General Provisions, Basic Standards and Policies • NU LAGUNA

Reference

Punzalan, A.. & Cardona, M. (2018). Government Accounting 2018 ed.

Ittelson, T. (2017). Nonprofit Accounting & Financial Statements: Overview for Board,
Management and Staff

Reck , Jacqueline & Wilson, Earl. (2015). Accounting for Governmental & Nonprofit Entities
(Irwin Accounting)

Copley, Paul. (2017). Essentials of Accounting for Governmental and Not-for-Profit

Organizations (Irwin Accounting)

Larkin, R. & Tommaso, Marie. (2016). Wiley Not-for-Profit GAAP 2016: Interpretation and
Application of Generally Accepted Accounting Principles

Freeman, R. & Shoulders, C. (2017). Governmental and Nonprofit Accounting (11th Edition)

23 | P a g e