Nature and Scope of the New Government Accounting System

Chapter 1 Nature and Scope of the New Government Accounting System ACCTG 533

AC51FB1

NEW GOVERNMENT ACCOUNTING SYSTEM (NGAS) Recommended by COA under its authority stated in Section 2 (2) of 1987 Constitution Article IX-D IX-D to provide for the need of an accounting system which will generate nancial reports that reect a more realistic picture of government government operations. “(2) The Commission shall hae e!clusie authorit"# su$%ect to the limitations in this Article# to &e'ne the scoe of its au&it an& e!amin e!aminati ation# on# esta$l esta$lish ish the techni techniue ues s an& metho metho&s &s reui reuire re& & theref therefor or## an& romul romul*at *ate e accoun accountin tin* * an& au&itin au&itin* * rules rules an& re*ulations# inclu&in* those for the reention an& &isallo+ance of irre*ular# unnecessar"# e!cessi sie# e!traa* aa*a ant# or unconsciona$le e!en&itures or uses of *oernment fun&s an& roerties, NGA introduced the basic policies and procedures! the new coding system! the account accounting ing system systems! s! boo"s! boo"s! regis registri tries! es! recor records! ds! forms! forms! repor reports ts and nanci nancial al statem statement ents s to be adopte adopted d by all nation national al gover governme nment nt agenci agencies es e#ective $anuary %! &''&.

OBJECTIVE NGA was made in order to respond to the need for the following( %. )he )he adop adopti tion on of a sy syst stem em that that is in conf confor ormi mity ty with with *nte *nterrnati nation onal al Accounting tandards+ &. ,u ,ursu rsuit it of eventu eventual al comput computeri eri-at -ation ion!! which which will will includ include e respon responsib sibili ility ty accounting! thereby ensuring the generation of various reports that are useful to management! lawma"ers and the general public+ . Generatio Generation n of relevant relevant and periodic periodic nancial nancial statement statements+ s+ and /. 0#ecti 0#ective ve tool for managers managers and e1ecu e1ecutiv tives es in e#ecti e#ective ve and e2cient e2cient monitoring of Agency performance.

GOVERNMENT ACCOUNTING 3enition( 3enition( Presidential Deree N!" #$$% & T'e G!ernent A*ditin+ C!de !, t'e P'ili--ines Seti!n #./" “.o “.oer ernm nmen entt acco accoun unti tin* n* enco encom mas asse ses s the the roc roces esse ses s of anal"/in* recor&in*# classif"in*# summari/in* a n& comm commun unic icat atin in* * all all tran transa sact ctio ions ns ino inol lin in* * the the rece recei itt an& an& &isosition of *oernment fun&s an& roert"# an& interretin* the results thereof, “

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AC51FB1

Ob?ectives( Presidential Deree N!" #$$% & T'e G!ernent A*ditin+ C!de !, t'e P'ili--ines Seti!n ##." @Government @Government accounting shall aim to( <%= produce information concerning past operations and present conditions+ <&= provide a basis for guidance for future operations+ <= provide for control of the acts of public bodies and o2cers in the receipt! disposition and utili-ation of funds and property+ and
INTOSAI 5 opera operates tes as an umbre umbrella lla organ organi-a i-atio tion n for the e1ter e1terna nall gover governme nment nt audit audit community that provides an institutionali-ed framewor" for supreme audit institutions to promote development and transfer of "nowledge! improve government auditing worldwide and enhance professional capacities! standing and inuence of members in their respective countries. 0 PSASB  PSASB  ,ublic ector Accounting tandards 4oard 5was created under C0A esolution o, 2338-12 dated 2338-12 dated October %'! &''>. 1 IPSASB  IPSASB  *nternational ,ublic ector Accounting tandards 4oard $ PPSASB  PPSASB  ,hilippine ,ublic ector Accounting tandards 4oard % NGA  NGA  National Government Agencies 2 3GU 4 8ocal Government 9nits 5 GOCC  GOCC  Government Government owned andBor Controlled Controlled Corporations








AC51FB1

/. Not relian reliantt on continuing continuing governmen governmentt funding to be a going concern concern
Deel!-ent !, PPSAS #" A--lia7 A--lia7ilit ilit8 8 !, IPSAS IPSAS (Assessent (Assessent)) 01isti 01isting ng *,A *,A were were assess assessed ed to deter determin mine e the applic applicabi abilit lity y of the provisions in the ,hilippines setting 0" E9-!s*re E9-!s*re dra,t (P!st&C! (P!st&C!ent&E ent&Eal* al*ate) ate) a. ,A4 issues issues e1posur e1posure e drafts drafts of all proposed proposed ,,A for comment comment by interested parties including COA o2cials and auditors! agency nance personnel! oversight agencies! professional organi-ations! academe and other sta"eholders. sta"eholders. b. )he ,A4 ,A4 sets a reaso reasonab nable le time to allow inter interest ested ed parties parties to consider and comment on its proposals. c. ,A4 evaluate evaluates s all comments comments recei received ved on e1posur e1posure e drafts drafts and ma"es such modications! where appropriate. 1" :*ndaental *ndaental Iss*es Iss*es Ehere an accounting principle or a signicant element of a disclosure reFuirement contained in *,A is considered to be in conict with the ,*8 , *8*, *,,* ,*N0 N0  8A 8AE E!! R980 R980  AN3 AN3 R0G9 R0G98A 8A)* )*ON ON! ! )* )* EO98 EO983 3 40 R0GAR303 as a fundamental issue and the accounting principle or disclosure reFuirement reFuirement may be changed . $" Stat*t Stat*t!r8 !r8 a*t'!r a*t'!rit8 it8 Eher Ehere e the the inte interrnati nation onal al stan standa darrd devi deviat ate es from from the the ,h ,hil ilip ippi pine ne regulatory or legislative environment! ,hilippine application guidance shall be issued accordingly. %" Disl!s* Disl!s*re re re;*ire re;*ireent ent )his may be amended when regarded regarded as being signicant for improving fair presentation of the matter. 2" PPSAS PPSAS n*7er n*7erin+ in+ a. ame number number as *,A to maintai maintain n lin" lin" b. eries eries of ,,A starting starting with with %'% if there there is no *,A *,A eFuivalent eFuivalent.. c. ,,A number numbered ed in







AC51FB1

Ehere Ehere issues issues related related to nancial nancial reporti reporting ng emerged! emerged! resear research ch were were done and a discussion document will be prepared based on other relevant accounting standards not in conict with ,hilippine laws.

6" S*7issi!n !, !, dra,t t! PSASB ,!r !nsiderati!n !nsiderati!n !, COA COA Ehere there are signicant changes or unresolved issues associated with an e1posure draft! the ,A4 may decide to re5e1pose a proposed ,,A. /" I, !nsidered !nsidered a--r!-riat a--r!-riate= e= ,!*s +r!*- dis*ssi! dis*ssi!ns ns e >ed d 78 t'e t'e e9-!s*re -r!ess"

ACCOUNTING RESPONSIBI3ITY RESPONSIBI3ITY Accounti Accounting ng responsib responsibilit ility y emanates emanates from the Constitutio Constitution! n! laws! policies! policies! rules and regulations. )he Constitution of the ,hilippines! the fundamental law law of the the land land!! mand mandat ates es the the "eepi eeping ng of the the gene genera rall acco accoun unts ts of the the government! government! promulgation of accounting rules! and the submission of reports covering the nancial condition and operation of the government. %. Commis Commision ion on on Audit Audit
COMMISSION ON AUDIT 5

Ieeps the gene generral acco accoun untts of the gove goverrnme nment! nt! prom promul ulga gate tes s accounting rules and regulations! and submits to the ,resident and Congress! within the time 1ed by law
9nied Accounts Code tructures% <9AC= Responsibility( 5 Consis Consisten tency cy of accou account nt classi classic cati ation on and codin coding g structu structure res s with the the & Revised Chart of Accounts %

,rovide ,rovides s framewor" framewor" for identify identifying! ing! aggregat aggregating ing and reporti reporting ng nancial nancial transact transactions ions in








AC51FB1

)itle JK**! 4oo" *K of the Administrative Administrative Code of the ,hilippines <0O &L&=! Chapter %! ection &. Handate( @)he 3epartment shall be responsible for the formulation and imple implemen mentat tation ion of the Nation National al 4udget 4udget with the goal of attaining our national socio5economic plans and ob?ectives. )he 3epartment shall be responsible for the e2cient and sound utili utili-at -ation ion of gover governme nment nt funds funds and reve revenue nues s to e#ecti e#ective vely ly achieve our countryDs development ob?ectives.M

34H 34H is tas" as"ed to cont contrrol and and moni monito torr appr approp opri riat atio ions ns and and allotments through the registries. registries. a. Registr Registry y of Appropri Appropriations ations and Allotments Allotments
9nied Accounts Code tructures% <9AC= Responsibility 5 Kalidation and and ass ssiignment of new codes for funding sou source organi-ation! and sub5ob?ect codes for e1penditure items. 5 Kalid alidat atio ion n and and assi assign gnme ment nt of new new prog progra ram! m! acti activi vity ty and and pro? pro?ec ectt codes to be decided ?ointly with proponent p roponent agency

BEREAU O: TREASURY 5 5

,lays a pivotal role in the cash operations of the national government. Accou ccount ntin ing g rule rules s and and regul egulat atio ions ns pert pertai aini ning ng to cash cash oper operat atio ions ns!! coll collec ecti tion ons! s! remit emitta tanc nces es and disb disbur urse seme ment nts! s! incl includ udin ing g publ public ic borrowings! are issued by the Commission on Au&it# ?ointly Au&it# ?ointly or with the concurrence of the 3epartment of 6inance and the 3epartment of 4udget and Hanagement.








AC51FB1

%. Receive and "eep nati ational funds! mana anage and control the disbursementDs thereof+ and &. Haintain Haintain accounts accounts of nancial transitio transitions ns of all national government government o2ces! agencies and instrumentalities. 9nder the new accounting system( %. Haintain the e*ist e*istr" r" of CA an& ele elenish nishme ment nt (44 (445) 5) for control and monitoring of NCA released by 34H. &. Honitor Honitor ban" transfers transfers it ma"es ma"es in replenishi replenishing ng its H3 accounts. accounts. 9nder 9nied Accounts Code tructures( 5 Respo espons nsiible ble for for the the consi onsist ste ency ncy of acco accoun untts clas classi si cati cation on and and coding standards with the Government 6inance 6inance tatistics
T?E GOVERNMENT AGENCIES 3epar 3epartm tmen ents ts!! bur bureaus! eaus! o2ce o2ces s and and othe otherr inst instru rume ment ntal alit itie ies s of the the Nat Nationa ionall Gove overnme nment! nt! inclu ncludi ding ng the the Cong Congrress! ess! the the $udi $udici ciar ary y! the Const Constit ituti ution onal al bodi bodies es!! stat state e coll colleg eges es and and univ univer ersi siti ties es!! and and othe otherr self self55 contained institutions and hospitals are reFuired by law to have accounting unitsB unitsBdiv divisi isions onsBde Bdepar partme tments nts!! which which are are to be of the same same level level wh other other unitsBdivisionsBdepartments unitsBdivisionsBdepartme nts in the agency a and nd under the direct supervision of the ead of the Agency. Accounting personnel shall( %. Haintain Haintain and "eep "eep curre current nt the accounts accounts of the agency+ agency+ &. ,rovid ovide e adv advice ice on the nanc nanciial cond condit itio ion n and and stat statu us of the the appr approp opri riat atio ions ns and and allo allotm tmen ents ts of the the agen agency cy as its its ead ead may may reFuire+ and . )o develop develop and conduct procedur procedures es designed designed to meet the needs of the management. Responsibility under New Responsibility N ew Accounting ystem( %. Ag Agen ency cy sh shal alll ?our ?ourna nali li-e -e the the Noti Notice ce of Cash Cash Allo Alloca cati tion on









AC51FB1

BASIC :EATURES AND PO3ICIES O: NGAS a. Ar*al A!*ntin+" A modied accrual basis of accounting shall be used. 9nder this method! all e1penses shall be recogni-ed when incurred and reported in the nancial statements in the period to which which they relate relate.. *ncome *ncome shall shall be on accrual accrual basis basis e1cep e1ceptt for tran transa sact ctio ions ns wher where e accr accrual ual basi basis s is impr imprac acti tica call or when when othe otherr methods are reFuired by law. b. One :*nd C!ne-t" )his system adopts the one fund concept and General :*nd! whic that is the General which h is gene genera rall lly y avai availa labl ble e for for all all functi functions ons of the gover governme nment. nt. epara eparate te fund fund accoun accountin ting g shall shall be done onl" done onl" when when specically reFuired by law or by a donor agency or when when other otherwis wise e necess necessita itated ted by circum circumstan stances ces sub?ec sub?ectt to prior prior S-eial P*r-!se P*r-!se appr approv oval al of the the Comm Commis issi sion on!! in whic which h case case a S-eial :*nd may be created. pecial ,urpose 6und is a fund appropriated for purposes other than those provided in the regular funds of government agencies! such as( i. Hisc Hiscel ella lane neou ous s ,erso ersonn nnel el 6un 6und d  us used ed to cove coverr per personn sonnel el benets whih are not provide for in the regular budget of the agency. ii. ii. Orga Organi ni-a -ati tion onal al Ad?u Ad?ust stme ment nt 6un 6und d  us used ed to cove coverr budge budgeta tary ry reFuirements of a newly created organi-ation! programBpro?ectBactivity within an agency. iii. Calamity 6und  used to cover relief! rehabilitati ation! recon econst stru ruct ctio ion n and and othe otherr serv servic ices es in conn connec ecti tion on with with calamities that may occur during the budget year. c. C'art !, A!*nts and A!*nt C!des" COA Circular No. &'%5








AC51FB1

d. B!!@s !, A!*nts" All national agencies shall maintain two sets of boo"s! namely(

Re+*lar A+en8 (RA) B!!@s. )hese shall be used to record the receipt and utili-ation of Notice of Cash Allocation
•

Cash Cash Recei eceipt pts s $ournal
•

•

Chec Chec" " 3isb 3isbur urse seme ment nts s $ournal
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8edg 8e dger ers s General 8edger
•

•



















Construction in ,rogress 8iabilities *ncome 01penses 



Nati!n Nati!nal al G!ern G!ernen entt (NG) (NG) B!! B!!@s" @s" )hese shall be used to record income which the agencies are not authori-ed to use and are reFuired to be remitted to the National )reasury. )hese shall 








AC51FB1

tatement of *ncome and 01penses tatement of Cash 6lows ,resentation ,resentation of a Comparison of 4udget and Actual Amounts

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Note Notes s to 6inan inanci cial al tat tatem emen ents ts sh shal alll acco accomp mpany any the the above statements. •

• •

f. T
:!*r&!ne8 !l*n listin+s 3ebit 4alance 3ebitt )otal 3ebi )otal O Credit 4alance 3 D Credit )otal

T
• •

g. All!tent and O7li+ati!n" Obligation accoun accountin ting g is modied to simplify procedures in the incurrence and liFuidation of obligations and the record recording ing of the budgetary budgetary accounts accounts
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•

Regis egistr try y of Allo Allotm tmen ents ts and and Obli Obliga gati tion ons s 5 Capi Capita tall Outl Outlay ay







AC51FB1

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?. Per-et*al Inent!r8 !, S*--lies and Materials" upplies 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 ta"e place e1ce e1cept pt thos those e pur purchas chased ed out out of ,etty etty Cash Cash 6und und whic which h sh shal alll be charged directly to the appropriate e1pense accounts. •

•

". Val*ati!n !, Inent!r8. Cost of ending inventory of supplies and materials shall be computed using the moving average method. )he acco accoun unti ting ng unit unit sh shal alll be respo esponsi nsibl ble e in comp comput utin ing g the the cost cost of inventory on a regular basis. •

l. Maintenane !, S*--lies and Pr!-ert8= Plant and E;*i-ent 3ed+er Cards" 6or appropriate chec" and balance! the Accounting 9nits of agencies! as well as the ,roperty O2ces! shall maintain upplies 8edger CardsBtoc" Cards by stoc" number and ,roperty! ,lant and 0Fuipment 8edger CardsB,roperty Cards by category of property! plant and eFuipment! respectively. •

C!nstr tr* *ti ti!n !n !, Asse Assets ts"" 6or asse m. C!ns assets ts unde underr cons constr truc ucti tion on!! the the Construction ,eriod )heory shall be applied for costing purposes. 4onus paid to the contractor for completing the wor" ahead of time shall be added to the total cost of the pro?ect. 8iFuidated damages charged and paid for by the contractor shall be deducted from the total cost of the pro?ect pro?ect.. Any related related e1penses e1penses incurred incurred during during the constructi construction on of the pro?ect! pro?ect! such as ta1es! ta1es! intere interest! st! license license fees! permi permitt fees! fees! cleara clearance nce fee! fee! etc. etc. shall shall be capita capitalili-ed! ed! and those those incurred incurred after the construction shall form part of operating cost.








AC51FB1

A umm ummar ary y of ,ubli ublic c *nfr *nfrast astru ruct ctur ures esBR BRef efor ores esta tati tion on ,ro?ects shall be prepared and included in the Notes to 6inancial tatements. •

•

o. De-reiati!n" )he straight5 straight5line line metho method d of depreciat depreciation ion shall shall be used. 3epreciation 3epreciation shall start on the second month month after purchase purchase of the the prop proper erty ty!! plan plantt and and eFui eFuipm pmen ent! t! and and a resid esidua uall valu value e eFuiva eFuivalen lentt to ten percen percentt of the purchase purchase cost shall shall be set5up set5up.. ,ublic ,ublic infrastruc infrastructur turesBr esBrefor eforestati estation on pro?ect pro?ects s as well as serviceabl serviceable e asse assets ts that that are are no long longer er bein being g us used ed sh shal alll not not be char charge ged d any any depreciation. depreciation. <ee Anne1 Anne1 A for 8ist of 0stimated useful life life of ,,0= •

Relassi>ati ati!n !n !, Assets Assets. ervic p. Relassi> erviceab eable le assets assets no longer longer being being used shall be reclassied to @ Ot'er AssetsM account and shall not be sub?ect to depreciation. depreciation. •

All!
Eliinati!n !, C!ntin+ent A!*nts" Contingent accounts shall r. Eliinati!n no longer be used. All nancial transactions shall be recorded using the appropriate accounts. Cash shortages and disallowed disa llowed payments! whic which h beco become me nal nal and and e1ecut ecutor ory! y! sh shal alll be recor ecorde ded d unde underr recei eceiva vabl ble e acco account unts s @3ue 3ue 6rom rom O2ce O2cers rs and and 0mpl 0mploy oyee eesM sM or @Receivables53isallowance @Receivables53isallowancesB sB ChargesM! as the case may be. •

3ia7ilit8" 8iability shall be recogni-ed at the time s. Re!+niti!n !, 3ia7ilit8" goods and services are accepted or rendered and supplierBcreditor bills are received. •










AC51FB1

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v. Eliinati!n !, !r!llar8 and ne+atie !*rnal entries" )he use of cor coroll ollary ary and and nega negati tive ve ?our ournal ent entries ies sh shal alll be sto stopped pped.. AcFui Ac Fuisit sition ionB3i B3ispos spositi ition on of assets assets shall shall be debite debitedBc dBcrredited edited to the appropria appropriate te asset accounts. accounts. *f an error error is committed! committed! a correcti correcting ng entry to ad?ust the original entry entry shall be prepared prepared" •

w. Pett8 Cas' :*nd. )he ,etty ,etty Cash 6und 6und shall be maintained under the imprest system. As such! all replenishments shall be directly charged to the e1pense account and at all times! the ,etty Cash 6und shall be eFual to the total cash on hand and the unreplenished e1pen e1penses ses.. )he ,ett ,etty y Cash 6und 6und shall shall not be used used to purcha purchase se regular inventoryBitems inventoryBitems for stoc".







•

:!rei+n C*rren8 Ad*stent" Cash deposits in foreign currency 1. :!rei+n currency and outstanding foreign loans shall be computed at the e1change rate prescribed by the 4ang"o entral ng ,ilipinas at balance sheet date. )he total cash deposits and foreign loans payable shall be ad?usted at the end of each month and any gain or loss on foreign e1cha e1change nge shall shall be recog recognini-ed. ed. )he subsid subsidiar iary y ledge ledgerr for foreig foreign n currency currency obligations shall reect the appropriate foreign currency in which the loan is payable. )he liability shall be e1pressed both in the foreign and local currency.







•

Anne1 A •

)A480 )A480 O6 0)*HA)03 0)*HA)03 90698 8*60 O6 ,RO,0R)! ,RO,0R)! ,8AN) ,8 AN) AN3 09*,H0N)

•

• •

Estimated Useful Life (in years)

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Property, Plant and Equipment

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Land Improvements Land Improvements  Runways/taiways   Railways  Ele#trifi#ation, Power and Ener$y %tru#tures &uildin$s ' tose tat are predominantly ood 

•

10 • !0 • "0 •

• •

10 •

•

10

•

Property, Plant and Equipment

Estimated Useful Life (in years)







•

  



 



6irport Equipment +ommuni#ation Equipment +onstru#tion and 3eavy Equipment irefi$tin$ Equipment and 6##essories 3ospital Equipment *edi#al, 8ental and La4oratory Equipment *ilitary and Poli#e Equipment

10 • 10 • 10 •

10 • 10 •

10

•

•

•

 



%ports Equipment e#ni#al e#ni#al and %#ientifi# Equipment .ter *a#ineries and Equipment

• •

7

•

10 • 10 •

10

•

•

ransportation Equipment  *otor 9ei#les  rains

•

7 • 10 •







• •

-ote 1 2 e estimated useful life sall depend on te len$t of te lease; It sall 4e te period of te lease or te estimated useful life of te assets, as $iven, wi#ever is sorter; •

Nature and Scope of the New Government Accounting System

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