Module 1

BASIC CONCEPTS OF GOVERNMENT ACCOUNTING

Overview
The implementation of the Government Accounting Manual (GAM) for National Government Agencies (NGAs) is another
milestone in the Philippine Government insofar as public sector of accounting is concerned. The GAM supersede the New
Government Accounting System (NGAS) Manual that NGAs have been using since 2002 when the Commission on Audit
(COA), based on the authority granted under Sec. 2 (2), Art. IX-D of the 1987 Constitution, prescribed the use of NGAS
effective January 01, 2002. The revision of the NGAS Manual was prompted by the implementation of the Philippine Public
Financial Management Reform Roadmap, which includes the development of the Philippine Public Sector Accounting
Standards (PPSAS) that are harmonized with the International Public Sector Accounting Standards (IPSAS). It also
introduces the Revised Chart of Accounts (RCA) and adoption of the Unified Account Code Structure (UACS) that will enable
the NGAs to properly recognize and present their financial transactions.

Module Objectives
After successful completion of this module, you should be able to:
• Define various terms in government budgeting and accounting;
• Describe the government budget/process system;
• Know and understand the budgetary cycle;
• Understand the coding system in the RCA; and
• Familiarize yourselves with the functions of the different government agencies responsible for the formulation and
control of government funds.

Government Accounting encompasses the process of analyzing, recording, classifying, summarizing, and communicating
all transactions involving the receipts and disposition of government funds and property and interpreting the results thereof
(Section 109, Presidential Decree (PD) No. 1445). PD No. 1445 (also known as Government Auditing Code of the Philippines)
governs the accounting system in the government.

Objectives of Government Accounting

• To produce information concerning past and present condition;
• 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 operation of government agencies for the information of all
persons concerned. (Section 110, PD 1445).

Agencies Charged with Government Accounting Responsibility

• Commission on Audit - a constitutional commission tasked with the accounting and auditing functions of the
National Government. The 1987 Constitution provides the legal basis for the performance of its function:

“The Commission on Audit 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".
(underscoring supplied) - Article IX-D, Section 2 par. (2)

• Department of Budget and Management - mandated to promote the sound, efficient and effective management
of government resources as instrument in the achievement of national socio-economic and political development.
It is responsible for the formulation and implementation of the National Budget.

• Bureau of Treasury - performs banking functions for the National Government. It receives and keeps government
funds, controls the disbursements thereof, and maintains accounts of financial transactions with each of the NGAs.

• Department of Finance – a government institution that formulates fiscal policy. Its basic function is revenue
generation to ensure adequate financing needs of the country. The different bureaus under the supervision of
Department of Finance (DOF) are the Bureau of Internal Revenue, Bureau of Customs, and Bureau of Treasury (BTr).
The Philippine Budget Cycle / Budget Process

1. Budget Preparation and Presentation - a government budgetary process wherein the President, through the
assistance of the Department of Budget and Management (DBM), shall prepare and submit to the Congress a budget
of expenditures and sources of financing, including receipts from existing and proposed revenue measures. It starts
with the issuance of a budget call by the DBM. Each department secretary (including state universities and colleges)
of the government submits the agency estimated budget for the next fiscal year to DBM.

Upon receipt of DBM of all budget estimates of different agencies, the DBM bureaus then review the agency
proposals and prepare recommendations. The recommendations are then presented to an Executive Review Board
which is composed of DBM Secretary and senior officials. Then it will be deliberated to entail a careful prioritization
of program and corresponding support, vis-à-vis the priority agenda of the National Government. The deliberation
investigates, revise, examine assemble, coordinate, and reduce or increase the budget estimates prepared by each
agency. Then, the DBM will consolidate all the budgets to form the proposed government wide budget to be
submitted to the President of the Philippines and Cabinet for further refinements or prioritization. After the
President and Cabinet approve the propose National Expenditure Plan, the DBM prepares and finalizes the budget
documents to be submitted to the Congress within 30 days before the opening of the regular session.

The budget preparation ends with the submission of the proposed national budget (The President’s Budget) to
Congress.

2. Budget Legislation or Authorization (Approval) - a government budgetary process which involves the enactment
by the Congress of the General Appropriations Act (GAA) based on the budget submitted by the President which
cannot be increased by the Congress. The initiative for the enactment of the appropriation law shall come from the
House of Representatives.

The President’s Budget is then assigned to the House of Appropriation Committee. Then, the Committee will advise
schedules and conducts hearings on the budgets of different departments and agencies and scrutinize their
respective programs and projects. After that, it will then craft the General Appropriation Bill (GAB).

The Appropriation Committee will then sponsor, present, and defend the GAB in the plenary session. After the GAB
is approved in the second and third reading, it will be forwarded to the Senate. The Senate conducts its own
committee hearings and plenary deliberations on the GAB. After both the House of Representatives and Senate
have finished their deliberations, they will each constitute a panel of the Bicameral Conference Committee whose
task is to discuss and harmonize the conflicting provisions of the House and Senate versions of the GAB to produce
a harmonized version of the GAB.

The Harmonized version of GAB is submitted to both Houses, which will then vote to ratify the GAB for submission
to the President.
 3. Budget Execution or Implementation - a government budgetary process which involves the implementation of the
GAA which includes the release of revenue allotment under the supervision of DBM. It commences with the
issuance of DBM’s guidelines on the release and utilization of funds.

Each government agencies and departments are required to submit their Budget Execution Documents (BEDs). The
BEDs outline the agency plan and performance targets which include physical and financial plan, monthly cash
program, estimate of monthly income, and list of obligations that are not yet due.

The DBM prepares an Allotment Release Program (ARP) to set limits for allotments issued to an agency to ensure
that releases fit the approved Fiscal Program of the government. The DBM also issues Notice of Cash Allocation
(NCA) to different agencies to cover their cash requirements for their projects and obligations. After expending the
government funds of different agencies, they are required to account all the funds to ensure that is used properly.

4. Budget Accountability - a government budgetary process which involves the submission of proper documentary
reports by responsible officer, liquidation of expenditures and audit conducted by COA to ensure the public funds
are spent in accordance with the appropriation act. This procedure happens together with the Budget Execution or
Implementation. The DBM monitors the efficiency and fund utilization, assess the agencies’ performance, and
provide evaluation and recommendations which is used to set reforms and new policies.

Each government agency submits Budget Accountability Reports (BARs) on a monthly and quarterly basis to show
how their funds are utilized and its corresponding physical accomplishments of the project. The DBM then reviews
the actual utilization of funds and physical accomplishments shown in the BARs and compared it with the
predetermined plans.

The COA audits the agencies used of government funds. The DBM then uses the COA audit reports in confirming
the agencies’ performance.

The Government Accounting Manual

The COA revised the NGAS prescribed under COA Circular No. 2002-02 dated June 18, 2002 because of the recent
developments brought about by the Philippine Public Financial Management Reforms and significant changes in the field of
accounting.

Legal Basis
The GAM is prescribed by COA pursuant to Article IX-D, Section 2 par. (2) of the 1987 Constitution of the Republic of the
Philippines which provides that: “The Commission on Audit 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".

Coverage
This Manual presents the basic accounting policies and principles in accordance with the PPSAS adopted thru COA
Resolution No. 2014-003 dated January 24, 2014 and other pertinent laws, rules and regulations. It includes the RCA
prescribed under COA Circular No. 2013-002 dated January 30, 2013, as amended; the accounting procedures, books,
registries, records, forms, reports, and financial statements (FS); and illustrative accounting entries. It shall be used by all
NGAs in the:
a. preparation of the general-purpose FS in accordance with the PPSAS and other financial reports as may be required
by laws, rules, and regulations; and
b. reporting of budget, revenue, and expenditure in accordance with laws, rules, and regulations.

Objective of the Manual

The Manual aims to update the following:
a. standards, policies, guidelines and procedures in accounting for government funds and property;
b. coding structure and accounts; and
c. accounting books, registries, records, forms, reports, and FS.
Basic Government Accounting and Budget Reporting Principles
Each entity shall recognize and present its financial transactions and operations conformably to the following:
a. Generally accepted government accounting principles in accordance with the PPSAS and pertinent laws, rules
and regulations;
b. Accrual basis of accounting in accordance with the PPSAS;
c. Budget basis for presentation of budget information in the FSs in accordance with PPSAS 24;
d. RCA prescribed by COA;
e. Double entry bookkeeping;
f. FS based on accounting and budgetary records; and
g. Fund Cluster Accounting.

Comparison between NGAS and GAM

Features NGAS Manual GAM

• Balance Sheet • Statement of Financial Position
• Statement of Income and Expenses • Statement of Financial Performance
1. FS Title
• Statement of Government Equity • Statement of Changes in Net Assets/Equity
• Cash Flow Statement • Statement of Cash Flow
Four (4) Six (6)
In addition to the above:
2. Components of FS • Statement of Comparison of Budget and
Actual Amounts
• Notes to FS
• COA Circular 2013-002, January 30, 2013
3. Chart of Accounts COA Circular 2004-008, September 20, 2004 • COA Circular 2014-003, April 15, 2014
• COA Circular 2015-007, October 22, 2015
4. UACS None Compliant
Regular Agency Book and National
5. Books Maintained By Fund Cluster
Government Book
Management Prerogative; COA prescribes the
6. Estimated Useful Lives of PPE Prescribed by COA
ranges
7. PPE Threshold None ₱50,000.00 and above (per unit)
• Moving Weighted Average
8. Inventory Costing Moving Weighted Average
• Specific Identification
Fund Clustering (prescribed in UACS Manual):
01 Regular Agency Fund
02 Foreign-Assisted Projects Fund
03 Special Account-Locally Funded/Domestic
Grants Fund
9. Fund Maintenance One Fund Concept 04 Special Account-Foreign Assisted/Foreign
Grants Fund
05 Internally Generated Funds/ Retained
Income Fund
06 Business Related Funds/ Revolving Fund
07 Trust Fund
10. Cash Flow Direct Method Direct Method
11. Completed Public Infrastructure Derecognized Derecognized
12. Statement of Financial Position:
• Assets • Without distinction • With distinction (Current and Non-Current)
• Liabilities • Without distinction • With distinction (Current and Non-Current)
13. Statement of Financial Performance
Form part of income Not part of Revenue from Current Operation
Subsidies, Transfers
14. Impairment Loss None Recognized
Direct adjustment to Equity; no more PYA
15. Adjustment affecting Government Equity Uses Prior Years’ Adjustment (PYA) Account
Account
• Without Authority to use – recognized by BTr
16. Income Collection Recognized by the NGAs concerned
• With Authority to use – recognized by NGAs
17. Accounting for Donation:
• With conditionality • Income • Liability
• Without conditionality • Income • Revenue
• With restriction • None • Revenue
18. Monitoring of Obligation/Payment None Section C of Obligation Request and Status
At least 5% of the cost, rates determined by
19. Residual Value of PPE 10% of the cost
Management
• RAOPS, RAOMO, RAOCO, RAOFE • RAOD-PS, RAOD-MO, RAOD-CO, RAOD-FE
20. Maintenance of Registries
• RBU • RAPAL, RBUD
21. New Standards PPSAS non-compliant PPSAS compliant
22. Registry of Revenue and Other Receipts None New
Unified Account Code Structure

Purpose. The objective of the government-wide UACS is to establish the accounts and codes needed in reporting the
financial transactions of the National Government of the Republic of the Philippines. The UACS provides a framework for
identifying, aggregating, and reporting financial transactions in budget preparation, execution, accounting, and auditing.
The key purpose of the UACS is to enable the timely and accurate reporting of actual revenue collections and expenditures
against budgeted programmed revenues and expenditures.

Reporting requirements that will be best served by the UACS include:

 Financial reports as required by the DBM and the COA;
 FS as required by the Public Sector Accounting Standards Board of the Philippines;
 Management reports as required by the executive officials/heads of departments and agencies; and
 Economic statistics consistent with the Government Finance Statistics (GFS) Manual 2001.

Application. The UACS will be used by all departments and agencies of the National Government and Government-Owned
and/or Controlled Corporations (GOCCs) with Budgetary Support from National Government including those maintaining
Special Accounts in the General Fund. The source of account descriptions and codes in the UACS object coding elements
includes the following:
1. The codes from the RCA prepared for accrual basis financial reporting,
2. The addition of some sub-object codes, and
3. Additional expenditure accounts designed for cash basis budgeting, such as those for capital outlays.

When this object coding is combined with budget classification coding for funding source, organization, location and
program, this framework collectively provides the harmonized budgetary and accounting classification codes known as the
UACS.

Responsibilities. The DBM, DOF-BTr and COA are collectively responsible for the UACS.
• Validation and assignment of new codes for funding source, organization, sub-object codes for expenditure
items shall be the responsibility of DBM.
• Validation and assignment of new Program, Activity, Project Codes shall be decided jointly by the proponent
agency and DBM.
• Consistency of account classification and coding structure with the RCA shall be the responsibility of COA.
• Consistency of account classification and coding standards with the GFS shall be the responsibility of DOF-BTr.

Elements. The key elements of the coding framework are:

1. Funding Source Codes (6 digits)
2. Organization Codes (12 digits)
3. Location Codes (9 digits)
4. Major Final Output (MFO)/Program, Activity and Project (PAP) Codes, and (9 digits)
5. Object Code (10 digits)

Revised Chart of Accounts – Updated 2019

The RCA (Updated 2019), as Object Code in the UACS, is based primarily on the rules and regulations as stated on the GAM
Volume 3 – Updated 2019 (Section 1) prescribed by the COA. During the implementation of the GAM for NGAs, the need to
provide additional accounts for some financial transactions and to modify some existing account titles, codes and
descriptions emerged. Hence, to enable agencies to properly recognize and present their financial transactions, the Chart
of Accounts is further revised to include additional and modified accounts.

The UACS Object Code (ten digits), which consists of the RCA Code (eight digits) and the UACS Sub-Object Code (two digits),
is used in the recognition of transactions in the books of accounts and in the generation of financial reports which requires
details by sub-object codes. Examples are Trial Balances and Financial Accountability Reports. For FS presentation, the
eight-digit RCA code shall be displayed. Codes are assigned to account groups to facilitate location of accounts in the
general and subsidiary ledgers, provide systematic arrangement and classification of accounts, and facilitate preparation of
consolidated FS/reports.
The UACS Object Code structure consists of ten (10) mandatory digits as follows:

1. Account Group represents the accounts classification as to (1) assets, (2) liabilities, (3) equity, (4) revenue/income,
and (5) expenses.

2. Major Account Group classifies the account within an account group, e.g. for asset major accounts: cash and cash
equivalents, investments, receivables, inventories, investment property, etc.

3. Sub-Major Account Group further classifies the account within the major account group, e.g. for cash and cash
equivalents: Cash on Hand, Cash in Bank-Local Currency, Cash in Bank-Foreign Currency, etc.

4. General Ledger (GL) Account represents the account to be presented in the detailed FS, e.g. Cash-Collecting
Officers, Petty Cash, etc. This is composed of two 2) segments. The first two digits from left is the GL account
code and the last digit is reserved to indicate whether it is a contra-account, e.g. Allowance for Impairment,
Accumulated Depreciation, etc.

5. UACS Sub-Object Code represents disaggregation of selected assets, liabilities, revenue/income, and
expenses.

Responsibility for Updating the UACS Object Code. The first eight digits of the UACS Object Code are drawn from the Chart
of Accounts prescribed by the COA. The last two digits (referred to as UACS sub-object codes) are prescribed by the UACS
Committee, composed of representatives from the DBM, DOF and COA. Codes which are not included in the RCA and UACS
Manual may be created by the COA and UACS Committee upon written request of agencies concerned.

Philippine Public Sector Accounting Standards

The objective of PPSAS is to set out the recognition, measurement, presentation, and disclosure requirement for financial
reporting in the Philippine Government.

Bases of PPSAS
a. Pronouncement issued by:
• International Public Sector Accounting Standards Board (IPSASB);
• International Accounting Standards Board;
• Philippine Institute of Certified Public Accountants; and
• International Organization of Supreme Audit Institutions
b. Relevant factors, including best accounting practices; and
c. Capacity of agencies to comply with PPSAS.

Scope of PPSAS
a. PPSAS set out requirements dealing with transactions and other events in general purpose financial reports.
b. PPSAS are designed to apply to the general-purpose financial reports of all public sector entities other than
Government Business Enterprises (GBEs).
c. Applies to all NGAs, local government units, GOCCs not classified as GBEs.

PPSAS consists of:

a. IPSASs (Accrual Based IPSASs per 2012 Handbook) developed by IPSASB and published by the International
Federation of Accountants; and
b. Philippine Application Guidance.
Watch:
Philippine Budget Process (https://www.youtube.com/watch?v=OUbUC94oa6s)

Readings:
• Government Accounting and Accounting for Non-Profit Organizations by Zeus Vernon B. Millan
• Government Accounting Manual (Volume 1)
• Government Accounting Manual (Volume 3 Updated 2019)
• Government websites such as: www.dbm.gov.ph and www.coa.gov.ph
• https://dbm.gov.ph/images/2020-People's-Enacted-Budget.pdf

Activities/Assessments:

RESEARCH ACTIVITIES
1. Based on the 2024 General Appropriations Act, identify the appropriations for state universities and colleges.
Which of the identified state universities and colleges got the highest appropriations?

2. What is a budget call? What are the contents of a budget call?

3. What is a supplemental budget?

4. Identify the status of the 2025 proposed budget in the Congress/Senate.

5. Compare the proposed budget with the most recently approved budget.

6. Compare cash-based budgeting with obligation-based budgeting.

THEORIES
1. It encompasses the process of analyzing, recording, classifying, summarizing, and communicating all transactions
involving the receipts and disposition of government funds and property and interpreting the results thereof.
a. Government Auditing c. Government Accounting
b. Government Reporting d. Government Analyzing

2. What is the title of the Revised Government Accounting System for national government agencies which will be
effective starting January 1, 2016?
a. Government Accounting Manual (GAM) c. Philippine Government Accounting System (PGAS)
b. New Government Accounting System (NGAS) d. National Government Accounting Manual (NGAM)

3. The Government Accounting Manual (GAM) aims to update the following, except
a. Standards, policies, guidelines and procedures in accounting for government funds and property
b. Scope and objectives of audit.
c. Coding structure and accounts
d. Accounting books, registries, records, forms and reports and financial statements.

4. A memorandum issued by the DBM to all government agencies which serves as the basis in the preparation of its
budget proposal.
a. Budget Call
b. Government Accounting Manual (GAM)
c. Philippine Public Sector Accounting Standards (PPSAS)
d. Notice of Cash Allocation (NCA)

5. The financial plan of the government for a given period, usually for a fiscal year, which shows what its sources are,
and how they will be generated.
a. Government Manual c. Government Accounting
b. Government Budget d. Government Framework

6. A government budgetary process which involves the enactment by the Congress of the General Appropriation Act
(GAA) based on the budget submitted by the President which cannot be increased by the Congress. The initiative for
the enactment of the appropriation law shall come from the House of Representatives.
a. Budget Preparation and Presentation c. Budget Execution
b. Budget Authorization d. Budget Accountability
7. A phase of the government budgetary process which involves the implementation of the general appropriation act
which includes the release of revenue allotment under the supervision of DBM.
a. Budget Preparation and Presentation c. Budget Execution
b. Budget Authorization d. Budget Accountability

8. It is defined as a good or service that a department or agency is mandated to deliver to external clients. It should
be within the department or agency’s control and be measurable, manageable & auditable.
a. Program c. Major Final Output (MFO)
b. Activity d. Project

9. The 3rd Key Element of Unified Account Code Structure (UACS) Framework is
a. MFO/Program, Activity, Program Codes c. Location Codes
b. Funding Source Codes d. Organization Codes

10. The approved national budget for 2024 is

a. ₱5.77 T b. ₱5.27T c. ₱5.02T d. ₱4.51T